In Ireland the most common type of limited company is a private limited company. This means that shareholders have liability up to the amount they have subscribed for the issued share capital. 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?

The conditions for claiming audit exemption are as follows:
1. The company must be a Private Limited Company;

This condition precludes public limited companies & guarantee companies from audit exemption.

2. The amount of turnover of the company must not exceed €7.3 million per annum;

3. The company’s assets must be less than €3.65 million at the end of its financial year;

4. The average number of employees must not exceed 50;

5. 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.

6. Certain Financial services companies do not qualify for audit exemption under the Second Schedule to the Companies Act 1999.

7. 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 Statemnets or claiming audit exemption are as follows:

8. If you are applying for Bank funding then you may need to produce audited accounts

9. Audited accounts carry more credibility that the accounts are accurately and completely prepared

10. Audited accounts may reduce the risk of a revenue audit

11. Audited accounts cost more to produce than non-audited Financial Statements due to the substantial amount of extra work involved

If you are considering locating your business in Ireland and require further advice on these issues please see O’Mahony Donnelly Contact details