Freelancing in Cyprus means you no longer work as an employee for a company but be your own boss and live a life of independence. Running a freelance business can seem to be hassle-free but it also requires you to meet certain obligations and navigate through possible legal challenges in Cyprus as a sole worker.
In this guide to becoming and working as a freelancer in Cyprus, we’ll help you answer questions you may have about registering to be a freelancer and duties you have when working as a freelancer in this beautiful island country.
As a freelancer living in Cyprus, you will enjoy the ancient beauty this island-country offers, not to mention the benefits of being your own boss and setting your own schedule. While taking a break from your diligent work, you can visit the many World Heritage sights or take a leisurely walk along one of many sandy beaches.
Some etiquette tips for doing business as a freelancer in Cyprus:
Before you can freelance in Cyprus, you must register your business with the government. Start by choosing a legal entity from the following list:
Fortunately, you can register as a "self-employed person" and skip many of the requirements of incorporating as a company. This entity is similar to a "sole trader" or "sole proprietor," where one person owns a single private share.
Once you decide on a legal structure for your business, it is time to choose a name. While this may seem like a pretty straightforward task, there are several steps to take:
Next, it is time to register to pay taxes in Cypress. Keep reading because you will learn how to do that in the following section.
When you become self-employed in Cyprus, you will be responsible to pay various taxes. These are listed below with their minimum reporting requirements. However, like in most other EU countries, tax laws often change without prior notice.
As a freelancer working in Cyprus, you must register to pay income tax no matter how much you earn. This is in contrast to an employee of a company who only has to pay personal income tax (PIT) on earnings over €19,500.
To register, you must submit form TD 2001 to apply for a tax ID number. In addition to asking for your personal information, it requires you to disclose all banking details. You will need form TD2003 if you are already registered, but any of your data has recently changed.
Once you fill out the form and sign it, you can mail it in or drop it by the nearest tax office.
Self-employed persons must register for social insurance tax with Social Insurance Services before conducting business activities. The good news is that you can pay the tax online. However, setting it up can be somewhat confusing.
First, you will have to download form YKA 021(application for payment of contributions online). You will also need to fill out form YKA 023 (Direct Debit Order) authorizing the Cyprus government to take payments directly from your bank account.
To freelance in Cyprus, you must register for VAT if your projected gross income exceeds €15,600 annually. Fill out and sign an original application form and either drop it off at your local tax office or mail it in.
You will also need proof you perform business functions in Cyprus. This typically includes an official document, such as a copy of an invoice or contract for services.
You must charge a standard rate of 19 percent VAT on most services. However, you may charge a reduced rate of nine percent when supplying goods and services to the transportation industry in Cyprus. This percentage also applies to food vendors and grocery suppliers.
Be sure to check this informative VAT guide for freelancers in Cyprus for greater details.
Client invoices must comply with VAT reporting requirements. At a minimum, they should contain the following information:
It makes sense to issue invoices on the same day every month. Also, you should establish concrete benchmarks which will help avoid misunderstandings and establish workflow and payment parameters. This method is beneficial for jobs lasting weeks or months.
Whenever possible, it is best to automate the invoicing process. Invest in an invoicing tool for freelancers that does most of the work for you, including:
It is vital to tailor your accounting and bookkeeping to meet customer requirements. However, you also have to ensure all financial transactions are in accordance with applicable tax reporting laws.
You must keep accurate records of:
The state tax office requires these items for reporting and auditing. They also show any discrepancies between income and expenses. With this information, you can determine which path to take to improve your financial position.
For example, you could start tracking your finances by creating a simple budget. This one step can keep you focused and improve accountability.
In addition, you can keep track of banking transactions easier by having a separate account for your business. Better yet, it is wise to bank at a different financial institution, so there is no doubt that your business is separate from your personal life. You could even have separate sub-accounts to set aside various tax payments at the end of the year.
Most freelancers dream of having a life of freedom and ideally an life-on-the-go style, which can be achieved only if you have a fully set-up remote business that allows you manage things paperlessly. With Xolo Leap, running your freelance career from the coziness of your home or the comfort of chilling on the beach is possible. We’ll help you register your one-person business with Estonian e-Residency and handle boring aspects like taxation or accounting. We’ll give a transparent environment for you to grow your business and a great presence in the EU market so you can find your clients and do your business easier.
Related: Learn more about benefits of acquiring Estonian e-Residency.
To open a freelance business in Cyprus requires careful planning. It also involves diligent bookkeeping, accounting, and tax reporting. Therefore, automating as many of these tasks as possible is wise.
Fortunately, there is a way to simplify your business functions while focusing on serving your clients. We offer automated tools that handle these mundane tasks so you can return to the activities most vital to growing your freelancing career. Launch your remote one-person business with Xolo Leap.