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Tips for Sole-Traders in Cyprus

Operating as a sole trader in Cyprus requires no up-front costs, whereas a company incorporation requires a cash outflow (cost varies). Also, companies are obliged to pay €350 per year (annual company levy) whereas individuals do not have to pay this fee.

Probably, the most important reason why someone may choose to run a business as a company instead of as a sole trader, is the potential of lower overall taxation on profits. However, other factors like the protection someone may enjoy from the veil of incorporation of a company might not be disregarded.

The major Characteristics self-employed businesses

Sole trader businesses in Cyprus have similar characteristics to companies, with the exemption that the ultimate responsibility remains to the sole trader instead of a legal person. Some of these characteristics are listed below, sole trader businesses:

  • Are taxed on profits, not turnover (just like companies)
  • Expenses incurred for the running of the business are tax allowable (deducted for tax purposes)
  • Are taxed on the PAYE tax brackets of the employed persons
  • When their turnover exceeds Euro 70,000 annually, audited financial statements must be prepared just like companies
  • Must be VAT registered and follow VAT rules and regulations
  • Can register as employers and be responsible personally for their staff payroll taxes, just like companies
  • Are frequently scrutinized by the VAT and Income Tax offices (more often than companies)
  • Are personally liable to VAT and Income Tax offices (unlike companies)

Conclusions

The protection from the veil of incorporation as well as the tax benefits from the incorporation of a company may leave no space for doubt as to whether a potential business person should incorporate a company in Cyprus instead of operating as a sole trader .

In certain cases, however, working as self-employed in Cyprus may be an ideal option if someone deals with temporary and/or lower income businesses.

A qualitative factor that should be taken into consideration, is the need for existence of a sole trader with employees. The risks of a sole trader having employees are high enough to justify the incorporation of a company even if the benefits in terms of profitability do not justify the incorporation of a company.

In all cases, the advice of a local expert should be sought before a decision is made.

You may be interested in the following service...

Client testimonials

"Very professional.

Time restrictions on my part so couldn’t attend interview to resolve my situation. Still in touch and when I am allowed back into Cyprus will hope to resolve situation then."

Margaret Blake (Jan 09, 2021)

Self-employed Set-Up Service

This service is available across Cyprus

Location

1Who is this service for?

This is the most inexpensive way to set up a business.

You will be self-employed and work within a simple structure implying little bureaucracy in which, basically, you are paid with the profits of your company.

You will not be considered as an employee, and will have less social benefits than you would as a regular employee. You will be liable for any and all losses incurred by the business.

2What does this service consist of?

  • Obtain residence permits or work permits.
  • Provide information about healthcare.
  • Registration with the Tax Authority and the Social Security System.
  • Help you to choose the right business name.
  • Choose your business activity. We can provide you with a list of recommended activities (list of trade licenses that are approved by administrative bodies).
  • Business address (whether it will be only for correspondence or you will really make your business there).
    Recommendations regarding the most appropriate fiscal arrangements to ensure taxation levels are optimised
  • Resolution of tax enquiries related to your professional activity.
  • Completion and presentation of all required tax returns.
  • Maintenance of all legally required records (income, expenses, invoicing, assets).
Support services

3Free Support Services Included

When combined with the free and innovative Advocate Abroad support services you can be sure that you are obtaining completely transparent legal services from registered and regulated English-speaking lawyers abroad.These support services include:

  • Verification of the regulatory status of your professional.
  • Fees as recommended by the Local Professional Body
  • Fees specified in advance and legally guaranteed.
  • Service levels agreed in advance and guaranteed.
  • All professionals must hold professional indemnity insurance.
  • Professionals' proficiency in English monitored.
  • Continuous quality controls and reviews.

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