I have never been in paphos over Christmas and New Year but as I understand there are a lot of restaurants open and most of them do Christmas dinners.
In Cyprus though, Christmas Eve, Christmas Day and Boxing day are all public holidays . I should think that the shops would be closed on Christmas Day.
I know that last year they had fireworks in Paphos for New Year.
Have a look at Jimbox's website http://www.cyprusliving.org and ask on there as I'm sure there are plenty of 'locals' who can help.
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