How you pay yourself from your Cyprus company has major tax consequences. Director fees, salary, and dividends are not interchangeable — each triggers a completely different tax treatment. For non-dom founders, one option is dramatically superior.
In Cyprus, taking EUR 100,000 as dividends (non-dom) costs EUR 2,650 in GESY. Taking the same amount as director fees or salary costs approximately EUR 33,000 in combined income tax, Social Insurance, and GESY. The difference is EUR 30,350 every year.
The Three Ways to Pay Yourself
1. Salary
A regular salary paid to you as an employee of your own company.
Tax treatment:
- Income tax: Progressive rates, 0% up to EUR 22,000, rising to 35% above EUR 60,000
- GESY (employee): 2.65% on gross salary
- Social Insurance (employee): 8.8% on gross salary (capped at EUR 66,612/year)
Company costs on top:
- GESY (employer): 2.90% of salary
- Social Insurance (employer): 8.8% (capped)
- Social Cohesion Fund: 2.0%
- Redundancy Fund: 1.2%
- HRDA: 0.5%
Key benefit: Salary reduces company taxable profit (deductible expense). Builds Social Insurance entitlements.
2. Director Fees
Fees paid specifically for your role as a director.
Tax treatment: Identical to salary. Under Cyprus law, director fees are employment income.
- Income tax: same progressive rates
- Social Insurance: same rates as salary
- GESY: same as salary
The myth: Some believe director fees receive preferential treatment. They do not in Cyprus. The characterisation as "director fee" rather than "salary" has no tax consequence.
One genuine use case: Non-resident directors receiving a fee from a Cyprus company may be subject to different treatment in their home country (depending on the DTT). Get specific advice for your situation.
3. Dividends
Distribution of company profits to shareholders after corporation tax has been paid.
Tax treatment for non-dom shareholders:
- Income tax: 0%
- SDC: 0%
- GESY: 2.65% (capped at EUR 180,000 base = max EUR 4,770/year)
Key features:
- Not deductible for company (paid from after-tax profits)
- Requires board resolution and distributable profits
- GESY reported and paid monthly via TD603 on TAXISnet
Full Comparison: EUR 100,000 Extraction
Option A: Salary or Director Fees (EUR 100,000)
| Item | Rate | Amount |
|---|---|---|
| Gross payment | EUR 100,000 | |
| Income tax | Progressive | EUR 24,385 |
| Employee GESY | 2.65% | EUR 2,650 |
| Employee Social Insurance | 8.8% (capped) | EUR 5,862 |
| Employee total deductions | EUR 32,897 | |
| Net in pocket | EUR 67,103 |
Additional company cost (not visible to you as employee but real): | Employer GESY | 2.90% | EUR 2,900 | | Employer Social Insurance | 8.8% (capped) | EUR 5,862 | | Other levies | 3.70% | EUR 3,700 | | Employer add-on | | EUR 12,462 | | Total company cost | | EUR 112,462 |
Option B: Dividends (EUR 100,000)
To pay EUR 100,000 in dividends, the company needs EUR 117,647 in pre-tax profit (to cover 15% CT):
| Item | Amount |
|---|---|
| Company pre-tax profit | EUR 117,647 |
| Corporation tax (15%) | EUR 17,647 |
| Net dividend | EUR 100,000 |
| Income tax (non-dom) | EUR 0 |
| SDC (non-dom) | EUR 0 |
| GESY (2.65%) | EUR 2,650 |
| Net in pocket | EUR 97,350 |
| Total tax (CT + GESY) | EUR 20,297 |
Summary Comparison
| Method | Company spends | Net in pocket | Total tax burden |
|---|---|---|---|
| Dividends (non-dom) | EUR 117,647 | EUR 97,350 | EUR 20,297 |
| Salary | EUR 112,462 | EUR 67,103 | EUR 45,359 |
| Director fees | EUR 112,462 | EUR 67,103 | EUR 45,359 |
Dividends net you EUR 30,247 more than salary, on the same economic extraction.
The Hybrid Strategy in Practice
The optimal structure for most non-dom Cyprus company owners:
| Component | Amount | Tax Cost |
|---|---|---|
| Small salary | EUR 22,000/year | ~EUR 2,519 (SI + GESY) |
| Dividends for remainder | As needed | 2.65% GESY only |
Rationale for the small salary: EUR 22,000 salary builds Social Insurance entitlements at minimal tax cost (it sits entirely within the 0% income tax band). Above EUR 22,000, income tax kicks in and the efficiency gap widens further.
At EUR 150,000 total annual extraction:
- Optimal (EUR 22k salary + EUR 128k dividends): ~EUR 5,907 (salary costs) + EUR 3,392 (GESY on EUR 128k) = EUR 9,299 total
- All salary: approximately EUR 55,000 in combined deductions
- Dividend-heavy strategy saves approximately EUR 46,000
Special Case: Non-Resident Director
A non-resident director of a Cyprus company may receive director fees without being a Cyprus tax resident. The tax treatment:
| Tax | Cyprus Treatment | Home Country |
|---|---|---|
| Cyprus income tax | Potentially applicable | Depends on DTT |
| Cyprus Social Insurance | May not apply if not Cyprus resident | Depends on SI agreement |
| Cyprus GESY | May not apply | Check with accountant |
This is complex territory. Some HNWIs use nominee directors precisely to keep management costs low while maintaining genuine substance. Get specialist advice if you are operating as a non-resident director.
The Board Resolution Requirement
Before paying dividends, you must pass a board resolution. This is non-negotiable:
A valid dividend board resolution must include:
- Date of the resolution
- Amount of dividend per share
- Total dividend amount
- Payment date
- Signatures of all directors
This document goes in the company minute book. Your auditor will check it. Missing resolutions = audit complications.
Find Cyprus tax advisors who specialize in remuneration structuring at CyprusDesk.
Model your own salary vs dividend split using the salary vs dividends calculator. For a focused guide on optimising the mix for tax efficiency, see salary vs dividends in Cyprus: the tax-efficient approach.
Disclaimer: Tax treatment depends on individual residency status, non-dom application outcome, and specific contractual arrangements. This article is for general information. Consult a qualified ICPAC-registered advisor for personalized advice. Find professionals at CyprusDesk.