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Setting Up a Sole Trader in Cyprus

Setting Up a Sole Trader in Cyprus

Updated on Thursday 15th October 2020

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Setting up a sole trader in Cyprus is the simplest form to start a business. Once an individual has obtained all necessary special permits and has informed the relevant authorities, he or she can start trading. It is quite simple to establish a sole proprietorship in Cyprus, but individuals deciding for this type of business must also know they will be held fully liable for the business’ debts. They should also take into consideration the Cypriot income tax that can reach 30% for individuals.

Our law firm in Cyprus can help you choose the right type of business taking into account all their advantages and disadvantages. You can also rely on our lawyers for assistance in setting up a sole proprietorship in Cyprus.

Who can operate as a sole trader in Cyprus?

Under the Company Law, there are no restrictions when it comes to the establishment of a sole trader, however, this business form addresses individuals only. Both Cypriot and foreign citizens can set up sole proprietorships, however, in the case of foreign citizens a residence permit will be required if they come from non-EU countries.

Our law firm in Cyprus offers full business registration services, including assistance in obtaining a residence permit for those interested in starting a business under a sole proprietorship. We also remind foreign investors that in order to be considered a tax resident in Cyprus, one must live here for at least 183 days in a calendar year.

The legal framework for establishing a sole proprietorship in Cyprus

The Cypriot sole trader is subject to the same regulations as the partnership. The main legal framework regulating sole traders is the Partnership and Business Names Law in the Cypriot Commercial Code. Just like partnerships, sole traders must register with the Cypriot Companies Registrar. The registration must be completed before starting operating. It must be taken into consideration that registration with the Trade Register must be made by lawyers in Cyprus.

After the business name has been approved, which might take place within a week, and subject to the nature of the business, the relevant documentation – like the Memorandum – are filed, through our lawyers in Cyprus, to the Registrar of Companies. Our team of local solicitors can assist you to start doing business in maximum four working days, in some cases even less than that.

One of the greatest advantages individuals from EU and EFTA (European Free Trade Association) countries have when setting up a sole trader in Cyprus is that they do not required a work or residence permit. Non-EU/EFTA citizens, however, are required to apply for work and residence permits before coming to Cyprus.

Sole traders can also ask for trademark registration in Cyprus for the goods or services they offer.

We invite businessmen to watch a short presentation on how to set up a sole trader in Cyprus

Choosing a name for a Cypriot sole proprietorship

One of the most important requirements related to opening a sole trader in Cyprus is related to the name of the business. The particularity of the sole proprietorship is that it can complete its activities under the owner’s real name or by registering a trade name. There is no difference between those choosing to operate under their own name and those deciding for a trade name, like in the case of Cypriot companies.

No matter the business name, an approval from the Business Register is required at the time of registration of the sole trader.

If you need guidance in registering a sole trader, our attorneys in Cyprus are at your disposal with information about the legal requirements in this sense.

Opening a bank account in Cyprus

After having registered the sole trader and its opening with the relevant governmental bodies, you will be able to set up a bank account, which is effectuated in a rather simple procedure. The documents necessary to do that, although these may vary depending on each bank, usually are:
 
  • the incorporation certificate of the business;
  • a Memorandum copy and a copy of the Articles of Association, if applicable;
  • a proof of the registered address of the company.
 
 
In comparison with different offshore alternatives, opening a sole trader in Cyprus represents a quite straightforward procedure, although having a specialist working for you can make it ever easier and more rapid. Keep in mind that our team of Cypriot lawyers are here to assist you in every step of the way, making sure that your new business entity complies with all the rules and regulations imposed by the local legislation. 
 

Steps for registering a sole trader in Cyprus

The procedure for establishing a sole proprietorship in Cyprus are the same as the company registration ones and implies:

  1. selecting a name for the business and submitting it for approval with the Cyprus Companies Registrar;
  2. filing the registration application with the Trade Register in Cyprus, just like in the case of companies;
  3. setting up the business’ bank account (the sole trader needs to have a different account than the owner’s bank account);
  4. applying for the necessary business licenses for the Cypriot sole trader, if required;
  5. registration with the local tax authorities for the income and value added taxes (the tax and VAT numbers will be issued);
  6. registering for social security purposes is also mandatory in the case of sole traders in Cyprus.

 

It is important to note that in the case of those setting up sole traders for offering services related to certain professions, specific requirements apply. Among these, the Official Receiver will request the diploma and proof of qualification of the applicant. Also, in certain cases, the sole trader will need to register with specific associations or unions in Cyprus.

If you need help in preparing the documents which need to be filed with the Trade Register, our Cypriot lawyers can assist you.

Self-employment in Cyprus

Another form of having one’s own company is self-employment. Self-employment is used by small traders, among which sole traders and partnerships in Cyprus. Another category of self-employed individuals are freelancers, but unlike the others, freelancers can conclude contracts with Cypriot companies. Self-employed individuals and sole traders in Cyprus are allowed to use their name as a trade name.  They are required to register for taxation purposes and social insurance with the relevant authorities.

Taxation of sole proprietorships in Cyprus

When it comes to the taxation of a Cypriot sole trader it is important to know that it can be taxed as a local or a foreign business. In the case of a local business, the sole trader will be taxed as an individual on his or her worldwide income, while as a foreign business, it will be taxed only on the income generated in Cyprus. It should be noted, though, that the last situation is rarely met here.

In order to determine the tax residency of a Cypriot sole proprietorship, the person must register with the local office of the tax authorities and file his or her tax returns here.

Generally, the sole trader will be subject to the personal income tax in Cyprus which is applied at progressive rates, as it follows:

  • - a rate of 20% is imposed for incomes of maximum 28,000 euros per year;
  • - a rate of 25% is imposed for incomes of maximum 36,000 euros on a yearly basis;
  • - a rate of 30% is imposed for incomes of maximum 60,000 euros per year;
  • - the maximum rate is 35% for an annual income of more than 60,000 euros.

 

Foreign citizens registered as sole traders in Cyprus can also benefit from the provisions of the country’s double tax agreements.

Why open a sole trader in Cyprus?

Those who are considering starting a business in Cyprus, should know that the sole trader will offer them the following advantages:

  • - it is the simplest business form acknowledged by the Commercial Code in Cyprus;
  • - the registration procedure of such business form is simple and straight forward;
  • - the registration requirements are also simple, while the documents to be filed are quite a few;
  • - the sole trader can be easily converted into another business form (most of the times into a limited liability company).

 

For complete details about all formalities that must be fulfilled for setting up a sole proprietorship you can contact our attorneys in Cyprus.