Commerce is by far the most important international business activity. Enterprises engaged in trade, marketing and distribution may be classified into those trading either as general commission agents or as specialised dealers in machinery and equipment, or commodities and consumer goods.

Transit trade via the island's seaports is carried out by international business companies on a large scale. They may store, maintain, break bulk or repackage their own transit goods in rented general or private bonded warehouses, provided the handling does not result in any change in the goods' customs tariff classification.

International Business Companies are allowed to:

• organize training seminars or demonstration courses in Cyprus for their foreign agents or clients

• establish permanent showrooms in Cyprus for exhibiting foreign products they represent provided all deals are on a wholesale basis and for delivery outside the island.

Ship management and maritime services is the second most important activity. Some of the world's largest ship management companies have their headquarters on the island from where they manage a considerable number of vessels under the Cypriot and foreign flags. Their success has led other enterprises offering shipping related services, such as marine insurance, average adjustment, ship classification etc, to be established in Cyprus.

The Cypriot merchant fleet ranks 5th on the list of maritime nations with over 2,700 ships exceeding 26 million gross tonnage. This achievement is due to the cost- competitiveness of the Cypriot Ship Registry, the island's well-developed maritime infrastructure as well as the high standard of services offered to international shipping. The usual practice is for each vessel to belong to a different shipping company. A foreign owner may register a vessel under the Cypriot flag by forming a shipping company with the permission of the Central Bank.

The Central Bank favours applications by existing foreign incorporated banks for the establishment of branches, as opposed to locally incorporated banking subsidiaries or associated companies. Applicants are expected to enjoy a good reputation internationally and have an established track record of growth and profitable operations.

International Banking Units (IBUs) are required to operate as fully staffed units and not merely as "brass plate" or "managed bank" entities.

International banking licenses are subject to certain conditions that depend on a number of factors, including the IBU's legal form (i.e. branch or subsidiary) and the applicant bank's financial standing and international reputation. In the case of branches there is no assigned capital requirement whereas for locally incorporated IBUs the Central Bank would, as a rough guide, expect a minimum paid up capital of USD 5 million.

All IBUs are exempt from most of the monetary policy and credit regulations applicable to onshore banks, such as the minimum reserve requirement, adherence to maximum interest rates, restrictions on the holding of foreign assets or investments in shares and immovable property. Ratios such as liquidity and capital to risk assets are applicable only to locally incorporated IBUs.

The term financial services means: dealing in investments, managing investments, providing investment advice or establishing and operating collective investment schemes. In this connection the term investments refers to shares, debentures, government and public securities, warrants, certificates representing securities, units in collective investment schemes, options, futures and contracts for differences.

Normally only branches, subsidiaries or associate companies of overseas financial services companies, enjoying a good reputation internationally and established in countries where there is adequate financial supervision, may be considered as eligible for a license to render international financial services from Cyprus.

Companies formed and registered with a view to carrying on insurance business in any part of the world other than Cyprus are treated as companies carrying on such business within the island. Their incorporation and operation is governed by the Insurance Companies Law, which is similar to the equivalent English law. It contains regulations relating to solvency margins, minimum subscription, financial reporting, investment of premiums and prohibition on loans to certain persons.

The incorporation of international captive insurance companies, which restrict their operations to insuring risk of the parent, holding or associated group of companies to which they belong, may be realised under more favourable conditions.

Cyprus has become one of the world's primary centres for information gathering and distribution. Most international news agencies and numerous publishing firms cover the whole of the Middle East and North Africa from the island. Among the factors that have contributed to this development are the guaranteed freedom of expression and the pluralistic political and social environment, combined with state-of-the-art telecommunications as well as an excellent network of connections by sea and air, not to mention the quality and cost of local services, including printing.

A substantial number of international business companies operating from fully fledged offices do not engage in trade but act as centres for logistics and co-ordination. As a result they barely generate any taxable profit from Cyprus.

This broad category may be further subdivided into those enterprises whose main object is purely back-up support for their group's activities and those conducting various operations abroad which cannot be classified under any of the categories already discussed. Such enterprises include building contractors, humanitarian agencies, aircraft charters etc.