A Cyprus sole trader is taxed personally, on bands that run from 0% up to €22,000 to 35% above €72,000 from tax year 2026. A limited company is taxed on its profits at 15%, up from 12.5%. Neither is cheaper by default: dividends, contributions and running costs move the result, so the choice belongs with your accountant.
Whichever form you trade under, the year ends with the same pile: receipts in a drawer, invoices in a mail thread, bank lines nobody has read since March. A comparison built on a guessed profit is only as good as the records under it.
What is the difference between a sole trader and a limited company in Cyprus?
As a sole trader you and the business are one person: the profit is your personal income, taxed on your personal bands, and the contributions are yours. A limited company is a separate taxpayer with its own tax rate. What reaches you from it is salary or dividends, each with its own charges.
The rest of this page follows that money, starting where you would: registering as self-employed in Cyprus.
How is a sole trader taxed in Cyprus from 2026?
From tax year 2026, the first €22,000 of taxable income is taxed at 0%, then 20% up to €32,000, 25% up to €42,000, 30% up to €72,000 and 35% above that. Your business profit is your personal income, so it falls into those bands with anything else you earn.
Contributions come off first. Social insurance and GESY contributions you actually paid are deducted in ascertaining taxable income, inside an aggregate cap of one fifth of taxable income across everything claimed under Article 14 of the Income Tax Law. What comes off is the amount paid, not a rate applied twice.
A quiet year still has a return in it. From tax year 2026 a resident of the Republic files if they had gross income within Article 5(1) of the Income Tax Law, and a resident aged 25 to 70 files with or without income. The Cyprus TD1 return guide covers the form, the Cyprus tax deadlines guide the calendar, the Cyprus provisional tax guide paying through the year.
For the arithmetic on one person's figures, read the Cyprus self-employed tax calculator guide. This page prints no worked example: one parked beside a company rate invites a subtraction that is not like for like.
How is a Cyprus limited company taxed?
A Cyprus company pays corporate income tax of 15% from 1 January 2026, up from 12.5%. That is the company's own bill, settled before anything reaches you as salary or as a dividend. The reform that set the rate was published in the Official Gazette on 31 December 2025 and is enacted law.
A loss travels further than it used to. For a person who must keep books, have the accounts audited by an independent auditor and file a return, a loss is set off against a later year's income for seven years from the end of the year it arose in, where the 2026 reform replaced five years with seven. The provision names a duty, not a legal form.
What a company must file, and whether its accounts need an audit, belongs to company law and not to the tax rules behind this page. Both go on the list the accountant's quote has to cover.
What does it cost to take money out of a Cyprus company?
Profit left in the company bears the 15% corporate rate. Paid out as a dividend to an owner who is tax resident and domiciled in Cyprus, it carries a special defence contribution (SDC) of 5% from tax year 2026. Two things change that: older profits, and owners who are not domiciled.
Older profits keep the older rate. A shareholder who receives a dividend from a company resident in the Republic within six years of the amending law taking effect, paid out of profits of tax years up to and including 2025, still bears 17% on it. A company that starts trading in 2026 cannot meet that condition; an older one may.
Domicile decides the rest. A Cyprus tax resident who is not domiciled in the Republic sits outside the contribution on dividends and on interest entirely. Domicile starts from the domicile of origin, with exceptions for long stretches lived abroad, and a person counts as domiciled anyway once they have been a Cyprus tax resident in at least 17 of the 20 years before the tax year.
That covers the defence contribution and nothing else. Whether income tax or GESY also reaches a dividend, and how a deemed or retained distribution is treated, are not in the sources behind this page, so this dividend line is incomplete and the accountant's written version has to carry them. The Cyprus tax overview has the wider map. Money can also leave as a salary, which is the next section.
What do social insurance and GESY cost on each route?
A sole trader pays social insurance and GESY as a self-employed person, on an assessed base. A company that pays you a salary charges payroll rates on it instead, split between employer and employee. Whether your own pay as an owner falls under those payroll rates is for your accountant to confirm.
The two columns differ in structure, not only in size:
| Sole trader (self-employed) | Salary paid by your company (employee rates) | |
|---|---|---|
| Social insurance | 16.6% own share plus 5.2% from the state, 21.8% in total | 8.8% employee, 8.8% employer and 5.2% state, 22.8% in total; the employer adds 1.2% to the Redundancy Fund, 0.5% to the Human Resource Development Fund and 2% to the Social Cohesion Fund |
| GESY | 4.00% on remuneration, with the state adding 4.70%; contributions are paid on at most €180,000 a year | 2.65% for the employee and 2.90% for the employer |
| Base and payment | 16.6% of estimated earnings set by the Tax Department from your experience and field of work, or on actual earnings if you request it; paid every three months | Payable by the end of the month following the contribution month |
The sole trader's base is not what came in. Each occupational category carries a minimum weekly insurable earnings figure, and the own share is due on the higher of actual earnings, capped at the maximum insurable earnings, and that minimum, so a thin month does not take the contribution to zero. The table is labelled by its own contribution year, 5 January 2026 to 3 January 2027, not the calendar year. The Cyprus self-employed social insurance guide has the categories and the amounts, and what a sole trader pays comes off before the bands.
Does the choice change VAT registration?
The registration test is not what separates the two. You must register for VAT in Cyprus if the taxable transactions of the 12 preceding months, or those you will carry out within the next 30 days, exceed €15,600, and the rule names a physical or a legal person alike. VAT is charged on turnover, not profit, whichever form you choose.
VAT registration in Cyprus covers registering, the VAT return guide the filing, and the Tax For All guide the portal.
Which route means more records, and when are accounts audited?
Both routes keep books and records in Cyprus for at least six years from the later of the return's filing deadline and the date it was actually filed. If a tax audit starts in the last year of that period, they are kept until the audit ends or one year after it began, whichever comes first.
The audit line is written for individuals: a natural person carrying on a business in Cyprus is exempt from preparing accounts when annual turnover and certain other gross income do not exceed €120,000, from tax year 2026. Above that the accounts go to an audit, or, where the total is up to €200,000 and the balance sheet total stays at or below €500,000 over at least two consecutive financial years, they may be submitted to a review. The law says "may", and the test reads turnover, never profit. Being exempt decides who signs the accounts off, not whether the records exist for six years.
On the company side this page says nothing: the sources behind it hold no audit or filing rule for a Cyprus company, in either direction. Ask the accountant what the company's accounts require, and read self-employed accounting in Cyprus for the other column.
Is there a profit level where a company beats a sole trader?
There is no single profit figure, and this page does not print one. The personal bands reach 35% above €72,000 while the company rate is 15%, but a dividend adds the special defence contribution, contributions follow the pay you choose, and running a company has costs this page cannot price. An accountant can model your numbers.
Five things move the answer, and the rate alone is not one of them:
- how much you take out, and whether as salary or as a dividend
- whether you are domiciled in Cyprus
- which contribution base applies on each route
- what the company costs to set up, run and close
- whether the work will look the same in three years
So ask for three things in writing: the tax on your forecast profit under both structures, the contributions under both, and the running cost of the company. Those three settle it on your own figures.
What this comparison leaves out
Quite a lot, and it is better said than hidden. The sources behind this page carry the sole trader's side far better than the company's. They say nothing about a company's own filing and audit duties, its annual returns, registry charges or return dates, and nothing about what forming, running and closing one costs. They do not settle how a company owner's own pay is classified for social insurance and GESY: the social insurance list that mentions directors is a list of self-employed occupational categories, not a statement about the directors of a limited company. Income tax and GESY on a dividend sit outside them too. That is where an accountant's quote earns its fee, and why this page prints no fee of its own.
Where TaxItEasy fits on either route
Nothing in our software chooses a legal form, works out a tax or files a return. It keeps the year underneath the comparison readable, and that year looks the same in both columns.
Documents are read, filed and matched to the payments that settled them, and the invoices you raise sit beside the supplier documents. You sign up and add your company, the roles around it are in companies, users, and roles, and you can invite your tax advisor with bounded, logged access instead of emailing a folder in January.
At year end the Excel report carries draft figures unless an advisor maintains the chart of accounts, so your accountant pulls the accounting reports as XLSX or you export your records for year-end. The sole trader side is the freelancer tour, the one-person company side bookkeeping for a one-person Ltd, and the Cyprus bookkeeping guide the hub for the year behind the figures. You or your accountant file on the Tax Department's portal.
Frequently asked questions
Is a limited company cheaper than being self-employed in Cyprus?
Not by default. The company rate is 15% from 1 January 2026 and the personal bands reach 35% above €72,000, but a dividend carries its own contribution and a company costs money to run. Ask an accountant for both calculations on your own figures.
What is the Cyprus corporate tax rate for 2026?
15% from 1 January 2026, up from 12.5%. The increase came with the reform package published in the Official Gazette on 31 December 2025, which is enacted law and not a proposal. It is the company's own tax, separate from what an owner pays on money taken out.
Do I pay tax on dividends from my own Cyprus company?
A tax resident domiciled in Cyprus bears a special defence contribution of 5% on dividends from tax year 2026. 17% still applies where the dividend is from a company resident in the Republic, out of profits up to and including 2025, within six years of the amending law. A resident not domiciled there is outside both.
Is the VAT threshold different for a limited company?
No. The rule names a physical or a legal person alike: you register where taxable transactions over the 12 preceding months exceed €15,600, or where transactions within the next 30 days will exceed €15,600. The test reads taxable transactions, never profit, in either form.
Does TaxItEasy choose or file the structure for me?
No. Nothing in the software picks a legal form, works out a tax or submits anything. What it keeps is the evidence underneath the figures: documents read and filed, bank lines matched to them, invoices you raise beside supplier documents, and records you can export. You and your accountant decide.