Quick answer
In Cyprus, working as self-employed is cheap to start and simple to run, but all profit is taxed as personal income at up to 35%, plus 16.6% social insurance and 4% GESY. A limited company pays 15% corporate tax, and its owner then pays 5% defence contribution (none for non-doms) and 2.65% GESY on dividends, but it costs more to set up and needs audited accounts every year. As a rough guide, at around €30,000 of profit self-employment usually wins once a company's running costs are counted; at €60,000 and above, a company can leave its owner several thousand euros better off.
- Self-employed: income tax 0% up to €22,000 then 20% to 35%, plus 16.6% social insurance and 4% GESY; audit needed only above €70,000 turnover.
- Limited company: 15% corporate tax on profit; dividends to domiciled residents pay 5% defence contribution and 2.65% GESY, non-doms pay only the GESY.
- A company costs about €1,100–€4,000 to set up and roughly €2,000–€4,000 a year to run (accountant, audit, secretary, annual return).
- Worked example at €60,000 profit: about €41,300 left as self-employed against about €47,100 through a company before its extra running costs.
- Dividends do not build a state pension; owners who take everything as dividends should plan their pension separately.
Whether you are a freelancer, a consultant, a tradesperson or opening a small shop, one of the first decisions in Cyprus is how to trade: on your own as self-employed (a sole trader), or through a private limited company (Ltd). The 2026 tax reform changed the numbers on both sides, so this guide compares them side by side, with worked examples.
The short answer
- Starting out, testing an idea or earning under about €40,000 a year? Self-employed is usually simpler and cheaper.
- Earning €60,000 or more, taking on partners or staff, or signing big contracts? A limited company is usually worth it.
- Non-dom? A company becomes attractive sooner, because your dividends carry no defence contribution.
Side by side
| Self-employed | Limited company (Ltd) | |
|---|---|---|
| Set-up | Register with the Tax Department and Social Insurance; close to no cost | Lawyer, Registrar and certificates; about €1,100–€4,000 |
| Who is liable | You personally, with everything you own | The company; your personal assets are protected (unless you give personal guarantees) |
| Tax on profit | Personal income tax, 0% to 35% | 15% corporate tax |
| Taking money out | All profit is yours, already taxed | Salary (taxed like any salary) or dividends (5% defence contribution for domiciled residents, 0% for non-doms) |
| Social insurance | 16.6% of your earnings (up to €68,904) | 8.8% employer + 8.8% employee on any salary; none on dividends |
| GESY | 4% of income | 2.9% employer + 2.65% employee on salary; 2.65% on dividends |
| Accounts | Simple accounts; audit only above €70,000 turnover | Audited (or reviewed) accounts every year |
| Running costs | Accountant, roughly €500–€1,500 a year | Accountant, auditor, secretary and fees, roughly €2,000–€4,000 a year |
| Credibility | Fine for most clients | Often expected by larger clients and for tenders |
Being self-employed
You register for a tax number through Tax For All (see our TIN guide) and as self-employed with the Social Insurance Services, then start invoicing in your own name.
What you pay
- Social insurance: 16.6% of your earnings, paid every quarter. Each occupation has a minimum level of earnings you pay on, even in a slow year, and you can ask to pay on your actual earnings if they differ.
- GESY: 4% of your income, on the same quarterly bill.
- Income tax on your net profit, under the 2026 bands: 0% up to €22,000, 20% up to €32,000, 25% up to €42,000, 30% up to €72,000 and 35% above.
Social insurance and GESY are deductible from your taxable income, within a combined limit of one fifth of that income. Our 2026 tax reform explainer covers the new personal deductions for children, rent and green upgrades.
Pros: - Almost no set-up cost and very little paperwork. - No audit while turnover stays under €70,000. - Your contributions build your Cyprus state pension.
Cons: - Unlimited personal liability for business debts. - High marginal tax once profits pass €42,000. - Harder to bring in partners or investors.
Running a limited company
The company is a separate legal person. It pays 15% tax on its profit, and you are paid through a salary, dividends or both. Our step-by-step guide explains how to set up a company in Cyprus.
Salary or dividends?
- Salary is a cost for the company, so it reduces corporate tax, but it carries social insurance and GESY on both sides and is taxed at personal rates. A modest salary keeps you insured for your pension and benefits.
- Dividends come from profit already taxed at 15%. For profits made from 2026, a Cyprus-domiciled resident pays 5% defence contribution plus 2.65% GESY; a non-dom pays only the GESY. Dividends are not subject to income tax.
Since 2026, the company is no longer taxed on "deemed" dividends for profits it keeps, so you can leave money in the company to grow the business.
Pros: - Limited liability. - Lower total tax at higher profits, especially for non-doms. - Easy to add partners, issue shares or sell the business.
Cons: - Set-up and yearly running costs. - Audit and annual return every year, even when the company is quiet. - More rules on taking money out; mixing personal and company money causes problems.
Worked examples for 2026
These examples assume a Cyprus tax resident with no other income and no special deductions, profit before paying the owner, and, for the company, all profit paid out as a dividend with no salary. They are simplified illustrations, not tax advice.
At €60,000 of profit
| Self-employed | Ltd, domiciled owner | Ltd, non-dom owner | |
|---|---|---|---|
| Profit | €60,000 | €60,000 | €60,000 |
| Social insurance (16.6%) | €9,960 | – | – |
| GESY | €2,400 (4%) | €1,352 (2.65% of the dividend) | €1,352 |
| Income tax | €6,300 | – | – |
| Corporate tax (15%) | – | €9,000 | €9,000 |
| Defence contribution on dividend (5%) | – | €2,550 | €0 |
| Total paid | €18,660 | €12,902 | €10,352 |
| Left for you | €41,340 | €47,098 | €49,648 |
How the self-employed income tax is worked out: social insurance and GESY add up to €12,360, but only €12,000 (one fifth of €60,000) is deductible, so tax is charged on €48,000: €2,000 at 20%, €2,500 at 25% and €1,800 at 30%.
How the company figures are worked out: 15% corporate tax leaves €51,000 to pay as a dividend, which then carries 5% defence contribution (€2,550) for a domiciled owner and 2.65% GESY (€1,352).
After about €2,500 of extra yearly running costs for the company, the domiciled owner is still roughly €3,800 better off than as self-employed, and the non-dom owner roughly €6,200 (the running costs also reduce the company's tax).
At €30,000 of profit
| Self-employed | Ltd, domiciled owner | |
|---|---|---|
| Social insurance and GESY | €6,180 | €676 (GESY on the dividend) |
| Income tax / corporate tax | €400 | €4,500 |
| Defence contribution | – | €1,275 |
| Left for you, before running costs | €23,420 | €23,549 |
At this level the two are almost the same before costs, so the company's running costs make self-employment the better choice.
One more thing to weigh: dividends do not count towards your Cyprus state pension. If you take everything as dividends, plan your pension another way, or pay yourself a small salary.
Other things that matter
- VAT works the same for both: registration is compulsory once taxable turnover passes €15,600 in 12 months.
- Non-EU nationals need the right residence and work permit for either option; see our guide to work permits for non-EU citizens.
- Non-dom status changes the maths a lot; check whether you qualify in our non-dom guide.
- Digital nomads working for clients abroad may be better served by the digital nomad visa.
What to do next
- Estimate your yearly profit honestly, including a slow first year.
- Ask an accountant to run your own numbers, including salary and dividend mixes.
- If a company makes sense, follow our step-by-step company set-up guide and check what a Cyprus Ltd must do every year.
- Find accountants and lawyers in our business directory.
This guide is general information, not tax or legal advice. Figures are based on 2026 rates; check your own situation with a Cyprus accountant.
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Frequently asked questions
Is it better to be self-employed or a limited company in Cyprus?
It depends mainly on your profit. Below roughly €40,000 a year, self-employment is usually cheaper once a company's running costs are counted. Above about €60,000, and especially for non-doms, a limited company usually leaves you with more, and it also limits your personal liability.
How much tax does a self-employed person pay in Cyprus in 2026?
Income tax at 0% on the first €22,000 of taxable profit, then 20%, 25%, 30% and 35% above €72,000, plus 16.6% social insurance and 4% GESY. Social insurance and GESY are deductible within a cap of one fifth of taxable income.
Can I switch from self-employed to a limited company later?
Yes. Many people start as self-employed and set up a company once their profit grows. Your accountant can plan the switch, including moving clients, contracts and VAT registration to the company.
Do I need audited accounts as self-employed in Cyprus?
Only if your turnover is above €70,000. Below that, you file your tax return with simple accounts. A limited company needs audited (or, for small companies, reviewed) accounts every year.
Do I pay social insurance on dividends from my Cyprus company?
No social insurance is due on dividends, but 2.65% GESY is. If you are also paid a salary as director, normal employer and employee social insurance applies to that salary.
Useful resources
- Constantinos Markou & Co – 2026 Cyprus tax reform: key changes for companies
- Nikita & Partners – Cyprus corporate tax 2026 FAQs
- Business in Cyprus (gov.cy) – Social insurance registration and contributions
- Eurofast – Cyprus Payroll Guide 2026
- Zeno Legal – Registering as self-employed in Cyprus (2026)
- Zeno Legal – Cyprus personal tax deductions 2026
