A Malaysian private company qualifies for audit exemption if it meets at least two of three criteria — annual revenue, total assets and employee headcount within the threshold — for the current and past two financial years, or if it is dormant. The thresholds are phased: RM1 million and 10 employees for FY2025, RM2 million and 20 for FY2026, and RM3 million and 30 from FY2027.
- You need at least TWO of the three criteria, not all three — exceeding one limb does not disqualify you
- The thresholds phase upward, so the figure that applies depends on when your financial year began
- Dormant companies qualify by a separate route, regardless of the thresholds
- Public companies, their subsidiaries, foreign companies and certain exempt private companies can never claim it
- Exemption removes the audit, not the filing — unaudited statements still go to SSM
- Practice Directive 3/2017 was revoked; guidance describing a zero-revenue company category is out of date
Who this applies to: Directors and company secretaries of small private Malaysian companies deciding whether audited financial statements are required.
On this page
Not every Sdn Bhd needs an annual audit. The test is more generous than most people assume in one respect and stricter in another — and both halves are widely misreported.
The generous half: you only need two of three criteria. The strict half: the thresholds are being phased in over three years, so the figures most articles quote do not apply yet.
The qualifying test
Under Practice Directive 10/2024, a private company qualifies if it satisfies at least two of the following, for the current financial year and the immediate past two:
- Annual revenue does not exceed the threshold
- Total assets do not exceed the threshold
- Number of employees does not exceed the threshold
Because only two must be met, a company with RM4 million in revenue but modest assets and a small headcount can still be exempt.
| FY2025 | FY2026 | FY2027 onward | |
|---|---|---|---|
| Revenue and assets | RM1,000,000 | RM2,000,000 | RM3,000,000 |
| Employees | 10 | 20 | 30 |
The preceding two years are tested against that same phase, not against the older, lower figures.
Separately, a company that has been dormant since incorporation, or dormant across the current and immediate past financial year, is exempt regardless of the thresholds.
This directive revoked Practice Directive 3/2017 with immediate effect. Guidance describing a separate zero-revenue company category is out of date.
Where the detail lives
| Question | Article |
|---|---|
| Which figures apply to my year, and how is “employees” counted? | Audit exemption thresholds |
| Am I in a category that can never claim it? | Who cannot claim audit exemption |
| Does my company count as dormant? | Dormant companies and audit exemption |
| What do I still owe if I take the exemption? | Life after audit exemption |
Two things to check before relying on it
An audit can still be demanded. Even a qualifying company must audit its accounts if it receives written notice, no later than one month before the end of the financial year, from members holding 5% of issued shares, from 5% of the members eligible to vote, or from the Registrar.
Exemption removes the audit, not the reporting. Unaudited financial statements still go to SSM, with the directors’ report, statement by directors, statutory declaration and a signed exemption certificate.
Common mistakes
- Requiring all three criteria. Only two are needed, which wrongly rules out companies that do qualify.
- Quoting RM3 million too early. That is the FY2027 figure. A company with RM2.5 million of revenue in FY2026 does not meet the revenue limb.
- Counting director-shareholders as employees, inflating headcount past the threshold unnecessarily.
- Relying on PD 3/2017 categories, revoked in December 2024.
What’s next
If you qualify, the next question is what you actually lodge — the filing obligation survives the exemption, and the certificate has prescribed contents.
Do I need to meet all three criteria to qualify for audit exemption?
No. Practice Directive 10/2024 requires at least two of the three — revenue, total assets and number of employees. A company that exceeds one threshold can still qualify on the other two.
Which thresholds apply to my financial year?
It depends on when the financial period commenced. Periods beginning in 2025 use RM1 million and 10 employees; 2026 uses RM2 million and 20; from 2027 onward it is RM3 million and 30. The two preceding years are tested against the same phase, not against the older figures.
Does audit exemption mean I file nothing?
No. An exempt company still lodges unaudited financial statements with the Registrar, together with the directors' report, statement by directors, statutory declaration and a signed audit exemption certificate.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Confirm whether SSM has issued any amendment or further practice directive after PD 10/2024 that alters the Phase 2 or Phase 3 thresholds
Sources
- Practice Directive No. 10/2024 — Qualifying Criteria for Audit Exemption for Certain Private Companies in Malaysia — SSM
- Frequently Asked Questions — Audit Exemption — SSM
- Companies Act 2016 — SSM
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 20 Jul 2026 | Approved and published. | — |