Cyprus - Special Advertising Section

Nation's Business, Sept, 1989

The Central Bank places some financing restrictions on foreign investors but freely grants permission to repatriate capital, profits, dividends, and interest from a foreign investment with no maximum percentage of profits that may be repatriated each year or minimum period for which foreigners must hold their investments.

Aside from the Central Bank of Cyprus, banking services are available from seven commercial banks with 300 branches and sub-branches across the island. Seventy insurance companies and insurance captives operate on the island.

Probably the biggest advantage Cyprus offers foreign investors is a Customs Union Agreement here with the European Economic Community, with the goal of a full customs union. "With this agreement, Cyprus has secured the most advanced form of economic relationship with the EC short of being a full member of the latter," says a high-ranking spokesman for the Ministry of Commerce and Industry. "Within the framework of this agreement, the EC has undertaken to dismantle all import duties on industrial goods of Cypriot origin and to abolish all quota restrictions on industrial goods exported from Cyprus."

In addition, the EC, after the endof the transitional period for the full Customs Union, will decide on the abolition of the rules of origin governing its trade with Cyprus--a significant advantage to companies that want to use the island as a regional distribution center for Europe.

"By 1992, all custom formalities and artiticial barriers to trade among European member states will be eliminated, thus creating a unified European market," says the Commerce Ministry spokesman. "This will inevitably lead to greater competitiveness of European products vis-a-vis imports from third countries."

The EC is Cyprus' most important trading partner, accounting for about 45 percent of all exports and 57 percent of all imports. Trade with Arab countries accounts for about 35 percent of its exports and 6 percent of imports.

Shipping is a natural extension of the Cypriot economy, and, through government incentives, this sector has grown to the point where the nation has the world's seventh-largest maritime fleet, with 2,000 ships sailing under its flag.

The tax benefits enjoyed by shipping companies include:

* No tax payable on profits from the operation of a Cypriot-registered vessel or on any dividend received from a ship-owning company.

* No income tax payable by officers or crew on their emoluments.

* No capital-gains tax payable on the sale or transfer of a Cypriot-registered vessel or the shares of a ship-owning company.

* No stamp duty payable on ship mortgage deeds or other security documents.

The emergence of the island as a major shipping center has helped attract many other types of companies that use the island as a distribution center, storing their goods in warehouse at Cypriot ports. The nation's association relationship with the EC and potential for a customs union is even further incentive for foreign companies to set up distribution centers.