Self-employed or limited company in Cyprus: which should you choose?

Below roughly the middle of the personal tax bands, self-employment is the cheaper structure to run: you are taxed personally, you file less, and below €120,000 of turnover you do not even prepare accounts. A limited company taxes profit at a flat 15%, opens the dividend route, and puts a legal wall between you and the business, but it must have its accounts audited or reviewed every year and it costs money whether it trades or not. The tax gap that justifies those costs only opens up at higher profits, and it is widest for non-doms who take dividends.

What is the difference between self-employed and a limited company in Cyprus?

The difference is legal personality. As a self-employed person, you and the business are the same person in law: you sign the contracts, you earn the income, and you answer personally for the debts. A limited company is a separate legal person. It signs its own contracts, owns its own assets and owes its own money, and your exposure is normally limited to what you put into it.

Everything else follows from that one distinction. Because the company is a separate person, it has its own tax return, its own accounts and its own obligations to the Registrar of Companies. Because you and your self-employed business are one person, you file one return and carry one set of obligations.

How is each one taxed in 2026?

Self-employed profit is taxed as your personal income. From tax year 2026 the bands are 0% up to €22,000, 20% to €32,000, 25% to €42,000, 30% to €72,000 and 35% above €72,000. The first slice is genuinely untaxed, which is why self-employment works well at modest income levels.

Contributions come on top. A self-employed person pays Social Insurance at 16.6% of notional insurable income set per occupational category, and since January 2026 a further 0.5% HRDA levy collected with the quarterly contributions. GeSY for the self-employed is 4% of income, capped at €180,000 of total annual income. Social Insurance stops at the maximum insurable earnings of €68,904 a year in 2026.

A company is taxed differently. Its profit, after salaries, expenses and everything else the business legitimately spends, is charged corporate income tax at 15% from tax year 2026, up from 12.5%. That rate is flat, so it does not climb as the business grows. But the money is still in the company. Getting it out means salary, which brings payroll contributions with it, or dividends.

Dividends are where the structure earns its keep. Dividend income is exempt from income tax. A Cyprus-domiciled resident pays Special Defence Contribution on them at 5% from 1 January 2026, cut from 17%, plus GeSY at 2.65%. A non-domiciled resident pays no SDC at all for up to 17 years, leaving only the 2.65% GeSY. One transitional wrinkle: dividends paid out of profits earned up to 2025 keep the old 17% rate until the end of 2031, so the 5% figure applies cleanly to a company formed now, because all of its profits are 2026 profits.

What do you keep from €100,000 of profit?

Say the business clears €100,000 in 2026 and you want all of it in your pocket.

As a sole trader, income tax on the new bands comes to €23,300. GeSY adds €4,000 at 4%. Social Insurance depends on your occupational category: a professional with more than ten years in practice is assessed on €982.38 a week of notional income, which works out to roughly €8,500 a year at 16.6%, plus about €250 of HRDA. All in, around €36,000 goes out and you keep about €64,000. Earlier-career categories are assessed on lower notional income, so their total lands a few thousand euros lower.

Through a company, the same €100,000 pays €15,000 of corporate tax, leaving €85,000 to distribute. A domiciled shareholder pays €4,250 of SDC and €2,252.50 of GeSY on the dividend and keeps about €78,500, a total burden of roughly 21.5%. A non-dom skips the SDC and keeps about €82,750, just over 17% all in. Against those numbers the company must earn back its own running costs, chiefly the audit or review and the bookkeeping behind it, but at this profit level it usually does, comfortably.

The comparison flips at lower profits. On €30,000, the sole trader pays €1,600 of income tax because most of it falls in the tax-free band, and the company's fixed costs eat whatever the structure could have saved.

At what profit does a company start to pay?

There is no single crossover number that fits everyone, but three forces decide where yours sits. First, the shape of the tax: the personal bands climb to 35% while corporate tax stays at 15%, so the flat rate wins more the higher you go. Second, extraction: salary is taxed personally whichever structure pays it, so the company's advantage lives in the profit you take as dividends or leave in the business, and it is largest for non-doms. Third, fixed costs: a company pays for its accounts, its audit or review and its filings even in a bad year.

The practical read: if your profit is modest, you draw all of it, and your clients are happy contracting with an individual, stay self-employed. If your profit is comfortably into the 30% and 35% bands, you can leave money in the business or you qualify as a non-dom, the company earns its overhead several times over. In the grey zone between, run the numbers on your actual figures before deciding. An hour of arithmetic is cheaper than a year in the wrong structure.

What does each structure file every year?

A company files far more than a sole trader, and the gap is the part founders underestimate.

A limited company keeps proper books and prepares IFRS financial statements audited by a statutory auditor licensed under the Auditors Law. Since February 2026 the smallest private companies, with net turnover up to €300,000 and gross assets up to €500,000 for two consecutive years, may have a lighter review engagement instead. The company files a corporate tax return, from tax year 2026 due by 31 January of the second following year, and an annual return to the Registrar, the HE32, filed within 28 days of its made-up date with a €20 filing fee. The old €350 annual levy is gone, abolished from 2024. Payroll filings apply if anyone is employed.

A self-employed person files a personal income tax return, from tax year 2026 due by 31 July of the following year, and pays Social Insurance and GeSY quarterly. Below €120,000 of turnover there are no accounts to prepare and no Registrar to file with.

Two obligations land on both structures alike. VAT registration is triggered at the same €15,600 threshold whether you trade as an individual or a company. And both self-assess provisional tax on the year's expected profit, paid in two instalments by 31 July and 31 December, with a 10% surcharge if the estimate comes in under 75% of the final figure.

Can you switch from self-employed to a company later?

Yes, and it is a well-worn path. Plenty of people start self-employed to test whether the work is real, then incorporate once the income justifies the overhead. Nothing about the decision is permanent.

Mechanically it is a fresh start rather than a conversion. You register a new company and move the business into it: re-sign or novate client contracts in the company's name, register the company with the Tax Department, get it a VAT number where required, transfer any assets properly, and decide whether to close the self-employed registration or keep it for other work. None of it is exotic, but it is a project, and it goes smoothest at a clean date such as the start of a tax year.

Going the other way is rarer and slower. A company that is no longer needed has to be struck off or liquidated: voluntary strike-off runs on form HE60 with a €20 fee and takes about three months from the Gazette notice, after settling everything owed to the Tax Department, Social Insurance and creditors. That asymmetry is a fair argument against incorporating before you need to.

How do you register each one?

Registering as self-employed means getting a TIN from the Tax Department and enrolling with the Social Insurance Services on form YKA 1-013, plus YKA 1-008 if you have never been insured. Insurance is compulsory from the day you start trading. We can handle the self-employed registration for you as a service.

Registering a limited company means name approval, incorporation documents and the Registrar. If you form the company through Sumly, your books open in Sumly the day you order, before the incorporation completes, you follow the registration status live in your dashboard, and the formation carries a 100% approval guarantee: your money back, minus already-paid government fees, if the company is not approved.

One thing to know before you choose. Sumly's platform keeps books for Cyprus limited companies and nothing else. If self-employment is the right structure for you now, and for many people at the start it is, we will register you, but your bookkeeping will live elsewhere until you incorporate. Choosing a structure to fit a piece of software would be a bad reason to choose anything, so we would rather you pick the right one and come to us when the company makes sense.

Questions founders actually ask

Frequently asked

Is a limited company always cheaper on tax than being self-employed?

No. A company adds a second layer on dividends: profit is taxed at 15% in the company, then SDC and GeSY apply when you distribute it, and salary is simply taxed on the same personal bands you were comparing against. Below the middle personal bands, the tax-free first €22,000 and the lower rates usually beat the company route on their own, and the company's fixed running costs widen the gap. The company tends to win at higher profits, especially when you can leave money in the business or take dividends as a non-dom.

How much tax does a Cyprus company owner pay on dividends in 2026?

Dividends are exempt from income tax in Cyprus. A Cyprus-domiciled tax resident pays 5% Special Defence Contribution on dividends from profits earned in 2026 onwards, plus 2.65% GeSY on income up to €180,000. A non-domiciled resident pays no SDC at all for up to 17 years, only the 2.65% GeSY. Dividends paid out of profits earned up to 2025 stay at the old 17% SDC rate until the end of 2031.

Does a self-employed person in Cyprus need audited accounts?

Sometimes. From tax year 2026 a self-employed person with turnover plus other gross business income up to €120,000 does not have to prepare accounts at all. Between €120,000 and €200,000, with gross assets up to €500,000, a lighter review engagement can replace the audit. Above €200,000, audited accounts are required. For tax year 2025 the old €70,000 threshold still governs.

Do I need a limited company to invoice foreign clients?

Not legally. A self-employed person in Cyprus can invoice clients anywhere in the world. In practice, some larger corporate clients prefer to contract with a company, and a few will not onboard an individual at all. If that describes your client list, it is a real argument for incorporating regardless of the tax arithmetic.

Can I be self-employed and a company director at the same time?

Yes. Plenty of people run one activity through a company while keeping a separate self-employed registration for another. It means two sets of registrations, returns and deadlines instead of one, so do it deliberately rather than drifting into it.

If I choose self-employed, can Sumly do my bookkeeping?

No. Sumly's platform keeps books for Cyprus limited companies only. We can handle your self-employed registration as a service, but if you stay self-employed your records will live somewhere else. If you later incorporate, we form the company and your books start in Sumly the day you order.