On the 7th August 2012 (via companies amendment no.2 act 1999, s32 Order 2012) the Irish Government added new thresholds for audit exemption for private limited companies in Ireland -- meaning that you do not need to have your accounts audited during the period in which you qualify. This means less hassle and expense for you.
The Directors of a Private limited company have to decide if their company meets the conditions for claiming audit exemption during a particular accounting year and if so whether it is a good idea to prepare audit exempt Financial Statements?
To qualify as audit exempt:
- The company must be a Private Limited Company;
- This condition precludes public limited companies & guarantee companies from audit exemption.
- The amount of turnover of the company must not exceed € 8 million per annum (previously €7.3 million per annum);
- The company's assets must be less than €4.4 million at the end of its financial year (previously €3.65 million);
- The average number of employees must not exceed 50;
- The company must not be a parent company or a subsidiary company;
- Therefore if the shares are held by/or the company owns a US LLC or UK limited company then audit exemption is not available.
The group structure & proposed business model should be considered carefully, where appropriate. It is easier to pass dividends, free of dividend witholding tax to US LLC or UK Limited company parent companies than it is to non-resident individuals due to changes made in Section 33, Finance Act 2010. This removed the requirement for certain non-resident companies receiving dividends from Irish resident companies to provide a tax residence and/ or auditor’s certificate, along with a signed non-resident declaration form, in order to obtain exemption from Dividend Withholding Tax (DWT) at source. Instead, a self-certification system applies under which a qualifying non-resident company provides a declaration to the dividend paying company or qualifying intermediary to claim exemption from DWT.
It is also easier to transact between group companies without falling foul of regulations on directors loans.
- Certain Financial services companies do not qualify for audit exemption under the Second Schedule to the Companies Act 1999.
- The company's annual return for the previous and current year must be filed on time.
- Further, key conditions for deciding between preparing and auditing your Financial Statements or claiming audit exemption are as follows:
- If you are applying for Bank funding then you may need to produce audited accounts
- Audited accounts carry more credibility that the accounts are accurately and completely prepared
- Audited accounts may reduce the risk of a revenue audit
- Audited accounts cost more to produce than non-audited Financial Statements due to the substantial amount of extra work involved
Would you like to learn more?