Self-Employed or Limited Company in Cyprus? The 2026 Verdict.
Don’t overpay tax by using the wrong structure. Master the 2026 tax bands and secure the EU’s most efficient business setup.
As of January 1, 2026, the gap between being a freelancer and a company director has widened. Following the landmark tax reform voted on December 22, 2025, your choice of entity determines whether you pay up to 35% personal tax or a flat 15% corporate rate with 0% dividends.
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[SECTION 1: THE 2026 MATH]
The new €22,000 tax-free personal threshold has shifted the “Breakeven Point.” If your net profit exceeds €45,000, the Limited Company is almost always the superior choice.
| Feature | Self-Employed (2026) | Limited Company (LTD) |
| Tax-Free Threshold | First €22,000 | First €22,000 (via Salary) |
| Tax on Profits | Progressive (20% – 35%) | 15% Flat Rate |
| Social Insurance | 16.6% (on “notional” income) | 8.8% (on actual salary) |
| Dividend Tax | N/A | 0% (For Non-Doms) |
| Annual Levy | €0 | €0 (Permanently Abolished) |
| Liability | Unlimited (Personal Risk) | Limited (Assets Protected) |
[SECTION 2: WHY THE LIMITED COMPANY WINS IN 2026]
1. The “Non-Dom Dividend Shield”
If you are a foreigner or a Non-Dom resident, you pay 0% tax on dividends. By taking a small salary (up to €22,000 tax-free) and withdrawing the rest as dividends, your effective tax rate drops to approximately 12-14% total—including corporate tax. A self-employed person earning the same amount would pay nearly double in progressive income tax.
2. Social Insurance Optimization
In 2026, self-employed contributions are 16.6% on estimated earnings. As a company director, you only pay 8.8% on your actual salary. This provides a massive monthly cash-flow advantage.
3. 2026 “Object Clause” Flexibility
Under the new 2026 commercial laws, a Limited Company can easily pivot industries, raise capital from investors, and hire non-EU staff via the Business Facilitation Unit (BFU). A self-employed individual is legally restricted from these high-growth pathways.
[SECTION 3: WHEN TO STAY SELF-EMPLOYED?]
Being a Sole Trader (Self-Employed) is only recommended if:
- Your annual revenue is below €25,000.
- You want zero setup costs and no audit requirements (Audit is mandatory for all LTDs).
- You do not need limited liability protection.
[SECTION 4: OUR 2026 TURNKEY PACKAGES]
Self-Employed Registration
We handle your TIC, VAT, and Social Insurance registrations in 72 hours.
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Company Formation & Transition
Full incorporation including “Asset-to-Equity” transfer if you are switching from self-employed to LTD.
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Tax Consulting Call
A 1:1 math-based session to show you the exact net-income difference for your specific revenue.
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[EXPERT FAQ: 2026 COMPARISON]
What is the “Audit Threshold” for 2026?
For a self-employed individual, an audit is only mandatory if revenue exceeds €70,000. However, all Cyprus Limited Companies must submit audited financial statements annually, regardless of turnover.
Can I switch from Self-Employed to an LTD later?
Yes. We specialize in “In-Kind” transfers. However, starting as an LTD from Day 1 is usually cheaper in the long run because it avoids the costs of re-registering for VAT and re-signing client contracts.
Is the €22,000 limit for everyone?
Yes. Both self-employed and company employees benefit from the first €22,000 being 0% taxed from January 1, 2026.