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

Below roughly the middle of the personal tax bands, self-employment is cheaper to run. You're taxed personally, you file less, and below €120,000 of turnover you don't prepare accounts at all. A limited company pays a flat 15% on profit, lets you take dividends, and puts a legal wall between you and the business. But it needs audited or reviewed accounts every year, and it costs money whether it trades or not. The tax saving that pays for all that only appears at higher profits. It's biggest for non-doms, residents who aren't domiciled in Cyprus, when they take dividends.

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

The difference is legal personality. When you're self-employed, 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. Your exposure is normally limited to what you put into it.

Everything else follows from that. The company has its own tax return, its own accounts and its own duties to the Registrar of Companies. As a sole trader 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 €22,000 really is untaxed, which is why self-employment works well on a modest income.

Contributions come on top. You pay Social Insurance at 16.6% of a notional insurable income, set for your occupational category. Since January 2026 you also pay a 0.5% HRDA levy, for the Human Resource Development Authority, collected with the quarterly contributions. GeSY, the national health system, charges the self-employed 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, pays corporate income tax at 15% from tax year 2026, up from 12.5%. The rate is flat, so it doesn't climb as the business grows. But the money is still in the company. To get it out, you pay yourself a salary, which brings payroll contributions with it, or you take dividends.

Dividends are where the company earns its keep. Dividend income is exempt from income tax. A resident who is domiciled in Cyprus pays Special Defence Contribution (SDC) 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, so only the 2.65% GeSY. One catch applies to older companies. Dividends paid out of profits earned up to 2025 keep the old 17% rate until the end of 2031. A company formed now only has profits from 2026 onwards, so the 5% rate applies cleanly.

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

About €64,000 as a sole trader, and about €78,500 through a company, or €82,750 if you're a non-dom. Here's the working. 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 at 4% adds €4,000. 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. At 16.6% that's roughly €8,500 a year, plus about €250 of HRDA. All in, around €36,000 goes out and you keep about €64,000. Earlier-career categories are assessed on a lower notional income, so their total comes in 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. Out of that gap, the company has to pay its own running costs, mainly the audit or review and the bookkeeping behind it. At this profit it usually does, with room to spare.

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. The company's fixed costs eat whatever it could have saved.

At what profit does a company start to pay?

There's no single crossover number that fits everyone. Three things 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 by more the higher you go. Second, how you take the money out. Salary is taxed personally whichever structure pays it, so the company's edge lies in the profit you take as dividends or leave in the business, and that edge 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.

Here's how we'd decide. If your profit is modest, you draw all of it, and your clients are happy to contract with an individual, stay self-employed. If your profit sits well into the 30% and 35% bands, and you can leave money in the business or you qualify as a non-dom, the company earns back its overhead several times over. In the grey zone between, run the numbers on your real figures before you decide. An hour of sums 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 founders tend to underestimate the gap.

A limited company keeps proper books and prepares financial statements under IFRS, the International Financial Reporting Standards. A statutory auditor licensed under the Auditors Law must audit them. Since February 2026 the smallest private companies may have a lighter review engagement instead. That covers companies with net turnover up to €300,000 and gross assets up to €500,000 for two consecutive years.

The company also files a corporate tax return, which from tax year 2026 is due by 31 January of the second following year. And it files an annual return to the Registrar, the HE32, within 28 days of its made-up date, the date the return describes the company on, with a €20 filing fee. The old €350 annual levy is gone, abolished from 2024. If the company employs anyone, payroll filings apply too.

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

Two obligations apply to both. You register for VAT at the same €15,600 threshold whether you trade as an individual or a company. And both pay provisional tax, which you work out yourself from the year's expected profit and pay in two instalments by 31 July and 31 December. If your estimate comes in under 75% of the final figure, you pay a 10% surcharge.

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

Yes, and many people do. They start self-employed to test whether the work is real, then incorporate once the income justifies the overhead. Nothing about the choice is permanent.

In practice it's a fresh start, not a conversion. You register a new company and move the business into it. Re-sign client contracts in the company's name or transfer them by novation, register the company with the Tax Department, get it a VAT number where needed, transfer any assets properly, and decide whether to close your self-employed registration or keep it for other work. None of it is unusual, but it is a project. It goes smoothest on a clean date, such as the start of a tax year.

Going the other way is rarer and slower. A company you no longer need has to be struck off or liquidated. Voluntary strike-off uses form HE60, costs €20 and takes about three months from the Gazette notice, once you've settled everything owed to the Tax Department, Social Insurance and creditors. That imbalance is a fair argument against incorporating before you need to.

How do you register each one?

To register as self-employed, you get a TIN, your tax identification number, from the Tax Department and enrol with the Social Insurance Services on form YKA 1-013, plus YKA 1-008 if you've never been insured. Insurance is compulsory from the day you start trading. We can handle the self-employed registration for you as a service.

To register a limited company, you need name approval, incorporation documents and a filing with 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 comes with a 100% approval guarantee, your money back if the company isn't approved.

If you're keeping a job while you start the business, read starting a side business in Cyprus while employed before you choose a structure. It covers the employment, registration and record-keeping questions to settle at the start.

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

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