Comparison of Tax Burden for Companies and Self-Employed Individuals in Cyprus

Is it more advantageous to register a company in Cyprus or to operate as a self-employed individual? This is a question many entrepreneurs face, and the choice depends on various factors, including the type of activity, expense structure, and the desired level of business protection and stability.

To provide a clearer comparison of the tax conditions for registering a company in Cyprus versus working as a self-employed individual, let’s consider an example with an annual income of €60,000. We will break down the tax obligations associated with each option so you can make an informed decision.

Option 1: Registering a Company in Cyprus and Employing Yourself

Registering your company provides the opportunity to employ yourself, provided you have the appropriate immigration status that allows you to work in the country. For example, this could be temporary protection status (for Ukrainian citizens), status for spouses of EU citizens, or as an owner and director of a company with foreign interest. This allows you to receive the legally mandated minimum wage and distribute the remaining profit as tax-free dividends.

Estimated Expense and Income Analysis with a Salary of €1,000 per Month

Additional Information

• Operating Expenses: This calculation does not account for other potential operating expenses such as business trips, participation in conferences, marketing and advertising costs, and other business-related expenses. Depending on the type and scale of your business, these costs can vary significantly.
• Tax Benefits and Incentives: Cyprus offers various tax benefits and incentives for certain types of businesses, such as those dealing with intellectual property. By taking advantage of the IP-Box regime, you can reduce the corporate tax rate to as low as 2.5%, which significantly lowers the overall tax burden.
• Social Insurance and Healthcare Services: Being employed in your own company and receiving a salary also grants you access to social insurance and healthcare services in Cyprus. This entitles you to a pension and other social benefits, as well as access to quality healthcare services.

Option 2: Taxes for Self-Employed Individuals in Cyprus

For those who prefer a simpler tax structure, working as a self-employed individual can be a good choice. However, the tax rates may be higher compared to registering a company and being employed by it.

Let’s take a look at the taxes and fees for an annual income of €60,000.

Being a self-employed individual in Cyprus also has its advantages, though the tax burden may be higher. With an annual income of €60,000, after taxes and contributions, you can expect a net income of approximately €46,776.

This calculation does not account for additional expenses related to the specific type of business you plan to conduct.

The choice between registering a company in Cyprus and working as a self-employed individual depends on your goals, preferences, and financial strategies. Registering a company in Cyprus can be attractive due to its tax benefits and opportunities for business growth. With the ability to pay dividends tax-free and a corporate tax rate of 12.5%, you can optimize your income and minimize tax liabilities.

To make an informed decision on whether it is more beneficial to register a company in Cyprus or work as a self-employed individual, it is essential to carefully analyze the tax conditions and financial prospects of each option.

Unsure which option is best for you? Consult our experts!

Our team of professionals is ready to assist you every step of the way—from choosing the optimal structure to maximizing tax benefits. We offer a personalized approach to each client, considering their unique needs and strategies.