Self-employment in Cyprus offers an attractive opportunity for those who wish to run an independent business, working for themselves. It is a suitable choice for individuals seeking flexibility in their work schedule and control over their income. Cyprus is known for its favorable tax environment and relatively simple registration process for self-employed individuals, making it a popular destination for both locals and expatriates.
For citizens of Cyprus and the European Union (EU), the process of registering as self-employed is quite straightforward and does not require special permits, allowing for easy commencement of business activities. However, for non-EU citizens, opportunities for self-employment are limited and depend on their immigration status.
Self-employed individuals in Cyprus must comply with local laws, including tax requirements, social insurance obligations, and in some cases, obtaining specific licenses. An introduction to the registration process and key legal aspects for different categories of citizens helps in understanding how to effectively and legally conduct business in Cyprus.
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Who is Eligible for Self-Employment in Cyprus
In Cyprus, the possibility of becoming self-employed depends on a person’s citizenship and immigration status. Here’s who is eligible for self-employment on the island:
Citizens of Cyprus and EU Countries
For citizens of Cyprus and the European Union, the procedure for registering as self-employed is simple and does not require additional permits. These individuals are entitled to work and conduct business activities without restrictions. The registration process involves obtaining a social insurance number and a tax identification number, as well as registering with the tax authorities.
Third-Country Nationals
For third-country nationals (i.e., those who are not citizens of Cyprus or the EU), the possibility of registering as self-employed is limited. This is due to the requirement of having a specific immigration status that grants the right to work.
The main categories of third-country nationals who can become self-employed in Cyprus include:
Spouses of EU or Cypriot Citizens
Third-country nationals married to EU or Cypriot citizens have the right to work in Cyprus. This right includes the possibility of registering as self-employed after obtaining the appropriate work permit. Spouses of EU or Cypriot citizens can apply for a residence permit with the right to work, allowing them to engage in self-employment.
Holders of Long-Term Residence Permits
This status is available to third-country nationals who have resided in Cyprus for a long period and meet several conditions, such as having a stable income and being integrated into the local community. Holders of this residence permit are allowed to work and, consequently, can register as self-employed.
Third-country nationals who do not fall into these categories are generally not allowed to engage in self-employment in Cyprus legally.
It is important to note that to successfully start a business as a self-employed individual in Cyprus, one must comply with all local legal requirements, including registration with the social insurance and tax authorities, as well as obtaining any necessary licenses and permits if required by their professional activities.
The Registration Process for Self-Employed Individuals in Cyprus
Registering as self-employed in Cyprus involves several key steps. These steps apply to both Cypriot and EU citizens, as well as those third-country nationals who are eligible for self-employment.
Step 1: Registering with the Social Insurance Service (SIS)
The first step is to register with the Social Insurance Service (SIS). To do this, you need to:
- Visit your local SIS office in person.
Fill out the form, which will be available in Greek.
Provide the necessary documents, such as your passport, your residence permit allowing you to be self-employed in Cyprus, and other documents as required by the SIS.
After successful registration, you will be assigned a social insurance number, which will be used for tracking your contributions and participation in social security systems.
Step 2: Obtaining a Tax Identification Code (TIC)
After registering with the SIS, you need to obtain a Tax Identification Code (TIC). This code is required for paying taxes and filing tax returns through the TAXISNET system. To get a TIC, you must submit an application to the Tax Department, providing documents that confirm your identity and status in Cyprus.
Step 3: Registering for Value Added Tax (VAT)
If your annual income exceeds €15,600, you must register as a VAT payer. Registration is done through the tax authorities, and you will be required to regularly file returns and pay VAT on your income.
Step 4: Opening a Bank Account
Many self-employed individuals in Cyprus open a separate bank account for business purposes. This helps to effectively manage income and expenses, as well as simplify the process of filing tax returns and financial reporting.
Step 5: Obtaining Necessary Licenses and Permits
Some types of activities require specific licenses or permits. For example, if you are engaged in medical, legal, or construction work, you will need to undergo additional procedures to obtain business permits.
Step 6: Keeping Accounts and Filing Reports
As a self-employed person, you are required to keep records of your income and expenses and file an annual tax return. Cyprus offers favorable tax rates, but it is important to stay updated with legislative changes and adhere to reporting deadlines.
The entire registration process takes some time and requires careful attention to detail. To avoid mistakes, many self-employed individuals seek assistance from professional accountants and lawyers who are familiar with Cypriot law and can help with the proper completion of all documents.
Taxes and Contributions for the Self-Employed in Cyprus
As a self-employed individual in Cyprus, you are obliged to meet your tax obligations and make contributions to various social funds. It is important to understand the structure of taxes and insurance contributions to properly plan your finances and avoid penalties.
Personal Income Tax
Cyprus has a progressive income tax scale. This means that the tax rate depends on the amount of your income:
- Income up to €19,500 is tax-exempt.
Income from €19,501 to €28,000 is taxed at 20%.
Income from €28,001 to €36,300 is taxed at 25%.
Income from €36,301 to €60,000 is taxed at 30%.
Income over €60,000 is taxed at 35%.
These rates apply to both Cypriot citizens and foreigners residing on the island. Tax returns are filed annually, and it is important to meet the filing deadlines to avoid penalties.
Social Insurance Fund (SIF) Contributions
Self-employed individuals in Cyprus are required to make contributions to the Social Insurance Fund (SIF). These contributions are calculated based on estimated or actual income and amount to 16.6% of income starting from 2024. Payments are made quarterly.
Amount_of_contribution_of_Self-employed_to_SIF_2024
For different categories of professions, minimum income levels are set, based on which contributions are calculated. For example, for teachers, lawyers, and accountants with less than 10 years of experience, the minimum weekly income is €443.45, which is used for calculating insurance contributions.
GESY Health System Contributions
Cyprus operates a National Health System (GESY), to which contributions are also mandatory for the self-employed. These contributions amount to 4% of your income and are paid simultaneously with Social Insurance Fund contributions. It is important to consider these contributions when calculating your financial obligations.
VAT (Value Added Tax)
If your annual income exceeds €15,600, you are required to register as a VAT (Value Added Tax) payer. The standard VAT rate in Cyprus is 19%, although reduced rates of 9% or 5% may apply to certain goods and services. VAT returns are filed quarterly, and the tax must be paid on time to avoid penalties.
Additional Taxes and Fees
Depending on the nature of your business, you may need additional licenses, which could also entail taxes or fees. For example, operating in real estate, construction, or financial services may require additional taxes and contributions.
Necessary Licenses and Permits
In Cyprus, a number of professions and activities require specific licenses or permits. This is a mandatory requirement for legally working and conducting business in certain sectors. Regardless of whether you are a Cypriot, EU citizen, or a third-country national, if you plan to engage in one of these activities, you will need to obtain the appropriate licenses.
List of Professions Requiring Licenses
Medical Professions
Doctors, dentists, pharmacists, and other healthcare professionals are required to obtain a license to practice. These licenses are issued by the relevant professional associations and health authorities in Cyprus.
For example, to obtain a medical license, you must be registered with the Cyprus Medical Council.
Legal Services
Lawyers and legal consultants must be registered with the Cyprus Bar Association and obtain a license to practice. Without this license, engaging in legal activities in Cyprus is prohibited.
Architects and Engineers
Working in these fields requires registration and licensing with the Cyprus Council of Architects and Engineers. This process includes verifying qualifications and work experience in these professions.
Financial and Insurance Services
Financial advisors, accountants, auditors, insurance agents, and brokers must obtain licenses from relevant regulatory bodies, such as the Central Bank of Cyprus or the Cyprus Securities and Exchange Commission (CySEC).
Tourism Services
Working in the tourism sector, including as a tour guide or running an agency, requires obtaining licenses from the Cyprus Tourism Organization (CTO).
Restaurants and Cafes
Running a business in the food service industry requires obtaining a health permit, and in the case of selling alcohol, a liquor license from local municipalities.
Construction and Real Estate
Construction companies and real estate agents are required to obtain relevant licenses from the Ministry of the Interior and other regulatory bodies. These licenses are necessary for performing construction work and real estate transactions.
License Obtaining Process
The process of obtaining licenses in Cyprus involves several stages:
Document Preparation
To obtain a license, you need to gather and submit a set of documents, including proof of qualifications, experience, and compliance with the specific profession’s requirements.
Registration and Application Submission
The application is submitted to the relevant regulatory body. For example, for medical professions, this would be the Cyprus Medical Council, and for legal services, the Cyprus Bar Association.
Payment of Fees
Obtaining a license usually involves paying government fees or duties, which may vary depending on the type of license and profession.
Review and Approval
The application and documents are reviewed, after which, if successful, the license is issued.
Auditor Reporting
Self-employed individuals in Cyprus are required to provide audited financial statements if their annual turnover exceeds €70,000. This means that if your income for the year surpasses this threshold, you must prepare and submit financial reports from an auditor along with your tax return. This rule applies to all self-employed individuals, including Cypriot, EU, and third-country nationals conducting their activities on the island.
The audit report must be prepared by a licensed auditor in accordance with international auditing standards. This report is necessary to ensure transparency and compliance with the financial regulations established by Cypriot law.
If your turnover does not exceed €70,000 per year, you are exempt from the obligation to provide audited reports; however, you are still required to submit standard tax returns and maintain accurate financial records.
This requirement is part of the overall financial control system in Cyprus and is aimed at maintaining a high level of transparency in the country’s business environment.
Self-employment in Cyprus is an attractive opportunity for those seeking independence and flexibility in their professional activities. With its favorable tax regime, simple registration procedures, and access to high-quality public services such as the GESY healthcare system, Cyprus is an appealing place to conduct business.
However, the registration process and business operations require careful compliance with local laws and administrative procedures, especially for third-country nationals who may face additional requirements and restrictions. It is important to understand that third-country nationals can become self-employed only under certain conditions, such as marriage to an EU or Cypriot citizen, or holding a long-term residence permit.
To successfully register and efficiently manage your business, it is advisable to engage professional consultants and carefully plan your financial and legal obligations. Adhering to all requirements and regularly updating your knowledge will not only help you avoid legal issues but also ensure the long-term success of your business.
Self-employment in Cyprus offers a wide range of opportunities to fulfill professional ambitions, and with the right approach, it can become the start of a successful and stable business.
