Structuring a Consulting Business in Cyprus

Most consultants focus on revenue. What decides the outcome is how profit is structured and where it is taxed. A consulting business in Cyprus pays 15% corporate tax on its net profit, and a non-domiciled resident owner can then receive dividends with almost no further tax. This guide explains how a Cyprus consulting company is taxed, how to take profit out, and what substance the structure needs.

How a Cyprus consulting company is taxed

A Cyprus company providing consulting services pays 15% corporate income tax on its net profit, the profit left after allowable business expenses. There is no separate rate for services income; the standard corporate rate applies.

Because consulting has few input costs and high margins, the taxable profit is close to the revenue. That makes two things matter: which expenses you can deduct, and how you take the remaining profit out.

Allowable expenses reduce the taxable profit

Corporate tax is charged on profit, not on turnover. Expenses incurred wholly and exclusively for the business reduce the taxable amount. For a consulting company these typically include:

• Salaries and social insurance for the consultant and any staff
• Office or co-working costs and equipment
• Professional subscriptions, software and insurance
• Travel and accommodation for client work
• Accounting, legal and compliance fees

Taking profit out: salary and dividends

Profit is usually extracted as a mix of salary and dividends. Salary is deductible for the company but taxable for the individual under the progressive personal income tax, with social insurance and healthcare contributions.

Dividends are where Cyprus stands out. A shareholder who is a Cyprus tax resident with non-domiciled status pays no income tax and no Special Defence Contribution on dividends. The only charge is the General Healthcare System contribution at 2.65%, capped at an annual income of 180,000 euros.

So the path is: the company pays 15% corporate tax on profit, then the non-dom owner receives the dividend with only the capped healthcare contribution to pay.

Substance and tax residency

For the company to be Cyprus tax resident, it needs genuine management and decision-making in Cyprus. For a consultant who relocates and runs the business from the island, this usually follows naturally, but it should be set up correctly rather than assumed.

Your own tax residency matters just as much. The dividend treatment depends on you being a Cyprus tax resident with non-dom status, which means meeting the Cyprus tax residency tests. VAT registration and social insurance also need to be reviewed at the start.

Is Cyprus right for your consulting business

Cyprus suits consultants who bill international clients, want an EU base with access to EU banking and the SEPA network, and are willing to run the business with real substance on the island. It is less suited to someone who wants a company in Cyprus while living and working full-time somewhere else.

If you run a consulting business and want to understand the Cyprus framework for your situation, read our guide to Cyprus tax residency and non-dom status, or contact us to plan the setup.