Although small in size, Cyprus offers a variety of business opportunities to both foreigners and locals. It has a modern, free-market, service-based economy giving international investors and domestic businesses the confidence to invest, grow, and prosper. Since this is a former British Colony, English is the second official language and is widely spoken among Cypriots.

Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Private Limited Company in Cyprus

The limited liability company (LTD) is the most popular business form in Cyprus. The majority of foreign investors choose to set up this business form as it can be established by EU or non-EU citizens. 

This company has a share capital, and its members’ liability is limited by the founding document to the amount they did not pay, if any, for the respective shares they hold.  The private limited liability company must have at least one shareholder and cannot have more than 50. A private limited company cannot offer its shares for purchase to the public. A limited liability company with shares is the most common form of company.

Registration of Private Limited Company in Cyprus

To register a company via the internet, you need to register in the electronic document registration system. To proceed with the registration of your company, you must, first of all, decide on:

1. Name: A condition for the registration of a company is selecting an appropriate name that meets the criteria of the Registrar of Companies and the provision of its relevant approval. You can check if the name is already taken in the Company Registrar search. Submission of the application can be made online.
2. Registered Office: The company must maintain a registered office. All notifications are sent to the company’s registered office, e.g., letters and various documents, in accordance with the Companies Law. The company office’s registration is done by submitting the form HE2 at the same time as the submission of the request for company establishment.
   

The registration process can be done online, submitting your request to the  electronic registration system of the Registrar of Companies along with the following:

• HE1 form
• Regulations Document
• Founding Document
• The  responsible witness signature statement
• A fee of €165.
  

Once the Certificate of Incorporation is obtained, the registered company needs to obtain a Value Added Tax (VAT) Number by registering itself with the Tax Department. Different goods and services are split into five categories. Each category is taxed with a different VAT rate:

• 19% VAT – The standard rate of VAT in Cyprus is 19%. All goods and services that don’t fall in any of the other four categories are taxed at this rate
• 9% VAT – Hotel accommodation, catering services, and other
• 5% VAT – Books, magazines and newspapers, theatre and cinema tickets, use of sporting facilities, and other
• 0% VAT – Services relating to imports, exports, and other
• Exempt from VAT – Supplies in the public interest (ambulance, postal services, not-for-profit organizations, etc.) and insurance, financial, and management of mutual funds
  

Self-employment in Cyprus

Self-employment is also a popular form of business in Cyprus. Self-employment registration cannot be done online, as the authorities require your signature. Photocopies or electronic signatures are not acceptable.

Go to the Department of Labour and register your company name. In the same building, you can register for Social Insurance and get a Social Insurance Number. Next, use the name registration document and Soc. Ins. Number when you complete your registration form. Here is a sample of that form.

Self-employment taxes

If you are self-employed in Cyprus, there are three main types of taxation which you should be aware of:

• Social insurance contributions
• Personal income tax
• VAT tax
  

The social insurance rate for self-employed individuals in Cyprus is 15.6%. However, note that this 15.6% is calculated for your estimated earnings, not your actual earnings. Your estimated earnings are determined by the tax department annually based on a person’s years of experience and field of occupation. However, you are allowed to file a special application and request to be taxed based on your actual income (typically used by individuals whose actual income is substantially lower than their estimated income). Social insurance is payable every three months. GESY (National Health System of Cyprus) is typically considered together with social insurance.

If your profits in the year are more than € 19,500, you are obliged to submit an IR1 (tax return). If your profits are less than € 19,500, you have the option (but not the obligation) to submit a tax return, if you so wish. You can get your relevant TIC (Taxpayer Identification Code) by registering with the Ministry of Economy. There are various exceptions/deductions which you may be entitled to with regards to income tax. You can find the Cyprus income tax rates here.

If you have sales income in any 12 consecutive months, which exceeds € 15,600, you must register with the VAT department. VAT registration can also be done optionally, even if your income is lower. VAT is payable every three months. The VAT rate is 19% in Cyprus. There are reduced rates – 9%, 5%, and 0% – for some very specific types of transactions. You can reclaim VAT on some purchase invoices dated up to three years before the registration date. The VAT tax authority falls under the jurisdiction of the  Ministry of Economy. If you want to read VAT legislation directly, check the tax department’s website.