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Do I need to create a Company to trade in Cyprus?
Not really you can trade as a person and be called a sole trader, or you can create your own company to trade.
The difference between the two has to do with the taxable amount each category has and the liability against the authorities.
The decision must always be advised by an independent registered accountant, tax expert or auditor.
What is the difference between a Sole Trader and a Cyprus Company?
Trading as a Sole Trader
As a sole trader, you will be trading under your name and be responsible personally against civil and corporate tax. You will also be taxed on your profit under the normal employment tax rates as any other employee.
Social security and NHS are different to self-employed persons than employees.
Trading as a Company
Trading as a Company the company will be taxed at 12.5% only which is the tax rate for all Cyprus Companies on its taxable profits and the shareholder could be subject to dividend tax if Cyprus Tax Resident and Domiciled.
The Company and its director will be responsible against Company law, civil cases and the authorities.
Social security and NHS costs will be borne partially by the Company as well as the employer.
Which Option is better for me?
Usually by the rule of thumb, if your turnover is less than Euro 70,000 and you perform simple, low-risk services or trade you can trade under your name as a sole trader.
Factors to consider when deciding between trading as a Sole Trader or a Cyprus Company
To decide whether to trade as a sole trader or a Company you must consider the below:
1. Size
Turnover is more than 70,000 then a Company is usually more appropriate
If you have assets, then a Company is commonly more appropriate
2. Risk exposure your business is exposed to.
If it contains the below then to minimise your personal risk a Company is a better fit
- have employees
- perform risky services (aesthetics, exposure to labor accidents, high professional exposure, etc)
- possibility of lawsuits
- VAT and tax complications
3. Prestige
It is more prestigious when you trade under a Company than as a person. You look more professional and bigger to your clients, prospects and creditors.
4. Other Factors
All factors must be considered in combination and with the assistance of an experienced accountant the solution will be clear.
Do I need an accountant straight away?
Definitely Yes!
The most important reason you need an accountant or a tax expert right away is to first inform you of any tax benefits that may exist like for instance the Non-Domicile Tax benefits which entitles you to worldwide tax-free dividends here in Cyprus.
Besides this, your accountant will advise you on the local taxes, rules, and regulations that you must know before you commence trade and of course file your personal tax return.
Is Cyprus different from other European countries?
No.
Cyprus is a normal European country with its taxation system and common law judicial system.
What makes Cyprus such a great destination to work are several tax advantages uncommon to other European countries and some of its unique characteristics which are no other than the below:
- Small distances - the whole island is long
- Awarded deep blue and turquoise color beaches
- Great Educational system
- English language spoken by everyone - second language
- Great judicial system.
- Great service providers including accountants and lawyers
- Overall - easy, convenient and comfortable to do business
Which types of industries or businesses choose Cyprus?
1. High Net Worth Individuals: With the application of the Non-Domicile Status, they can enjoy tax-free worldwide dividends.
2. Shipping Companies: Tonnage tax system - taxed only on the weight they carry based on specific formulas, not their profits.
3. Forex & Investment Firm Industries: Easy, fast and convenient to get licensed
4. Holding Companies: Tax-free dividend income
5. Business from 3rd Countries: A Cyprus company is a low-cost highly professional jurisdiction to use to gain access in Europe.
6. Micro Businesses: Small companies usually comprising of one to two persons enjoy the beautiful island and work from their PCs
7. Satellite Businesses: Low setup and payroll costs enable Companies to have satellite offices in Cyprus where they can attract high-calibre personnel at low costs (usually 1.3 of their local cost).
8. HeadQuarter Relocation: Low setup and payroll costs coloured with high quality service providers and high calibre personnel make Cyprus a jurisdiction hard to oversee when deciding for new headquarters or an overseas branch.
What type of taxes exist in Cyprus?
In Cyprus we have the following personal and corporate taxes:
- Income Tax - scaled from 0% up to 19,500 to 35% for salaries exceeding Euro 60,000
- Corporation Tax 12.5%
- Dividend Tax - 17% or zero for non-Cyprus tax residents and domiciled.
- Social Security - 12% ERs / 7.8% EEs
- NHS (National Health System Tax) - 2.9% for employers and 1.7% for Employees
- VAT - a standard rate of 19%
How much accounting and audit cost for a small Cyprus company?
If you own a Cyprus Company then you should expect something between Euro 1,700 - Euro 2,500 for a small company and more than Euro 2,500 + VAT for larger companies with several employees and lots of paperwork.
See our indicative prices by clicking here.
Is an audit required for Cyprus Companies?
Yes.
A Statutory audit is required for all Cyprus companies which exceed certain thresholds.
Can I do the accounting of my Company?
Even though there are solutions that theoretically make the accounting function seem easy in practice it is complicated, and we strongly urge you not to. It is best to spend this time improving your own business.
Don’t forget, bank and payroll must be performed and be reconciled which is a complex task.
Also, auditors can use your accounting records if your Trial Balance (summary of all accounts) is fully reconciled. If not, then they will have to redo the accounting which means you will still have to be charged for accounting services.
Why would someone or a company relocate to Cyprus?
There are numerous reasons why Companies, Individuals and Solopreneurs choose Cyprus as their chosen destination.
The main reasons are:
1. Lifestyle
- Summer 8 months a year with blue colour beaches, beautiful seafronts and amazing hotels
- Easy and convenient to work, raise a family, transport, and do business
- Everyone speaks the English Language
- Relatively big island - it takes 3 hours at 120 kilometres per hour to cover it.
2. Tax Reasons
Attractive Tax Regime for Businesses>
- 12.5% Corporation Tax
- Tax-Free Dividends for Non-Domiciled persons
- Incentives for Payroll (50% tax haircut for employees earning more than Euro 100k)
- Low Payroll Costs
3. Security & Strong Law System
Cyprus uses the Anglo-Saxon System which relies on the precedents of cases. Therefore, Cyprus investors know what to expect when deciding to take matters to court. Also, the local decision of the courts can be challenged by addressing it to the EU Supreme Court of Justice.
What are the first steps for someone / business relocating to Cyprus?
The first step a Company or an Entrepreneur should do is to get in touch with an experienced accountant and tax expert who will ensure all tax benefits are been correctly set up so that they enjoy the maximum tax benefits during their stay in the republic.
Therefore having a lawyer as well is always recommended.
How much is a Cyprus Company taxed?
Cyprus companies are taxed only 12.5% and the dividend payments are tax-free for non-Cypriots or persons who are tax residents in Cyprus but not domiciled.
Is Cyprus considered a Tax Heaven?
Cyprus is not considered a tax heaven as:
- Member of the EU (Cyprus follows EU law & directives)
- Complies with the OECD directives
- It has a 12.5% corporation tax
- An audit is required for all Cyprus companies
- Strict banking requirements
- More than 70 double tax treaties mainly with EU member states
What are the most common office expenses in Cyprus and how much do they cost?
The below costs are indicative in case the company wants to establish physical prescence in the Republic of Cyprus, which is not a requirement.
► Office Space - Rent from €400 - € 2,000 per month depending on the city and size, Limassol being the most expensive and Larnaca the cheapest.
► Electricity from €250 every 2 months to €400 every two months depending on usage
► Water from €20 - €40 per month depending on usage
► Internet from € 30 - € 50 per month fixed fees + telephone usage
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