Starting Thursday, 2 April 2026, the new Foreign Direct Investment (“FDI”) screening framework of Cyprus enters into force. The framework is established under the Law on the Establishment of a Framework for Screening Foreign Direct Investments of 2025 (Law 194(I)/2025) (the “Law”), introducing a national mechanism for reviewing foreign investments, particularly those that may impact national security or public order.
1. Key Definitions
What Qualifies as a Foreign Direct Investment?
Any investment by a foreign investor aiming to establish or maintain lasting and direct links with the entrepreneur or undertaking receiving the capital in order to carry on an economic activity in Cyprus, including investments that enable effective participation in the management or control of a company conducting such economic activity.
Who is Considered a Foreign Investor?
- A natural person that is not an EU, EEA, or Swiss citizen; or
- An undertaking of a third country (not an EU, EEA, or Swiss country).
2. Notification and Approval Requirement
The obligation on a foreign investor to make a FDI filing in Cyprus is triggered when all three of the following conditions are met:
- Special Participation Threshold: The FDI results in the acquisition (either directly, or indirectly) of at least 25% of the share capital and/or voting rights in the relevant undertaking or the ability to exercise decisive influence over the activities of the relevant undertaking (special participation).
- Transaction Value: The investment alone or combined with other transactions between the same parties within a 12-month period, reaches or exceeds €2,000,000.
- Strategic Undertaking: The investment concerns an undertaking of strategic importance, i.e., one operating in particularly sensitive sectors, including:
- Energy
- Transport and Aerospace
- Water Supply
- Healthcare
- Communications and Media
- Education and Tourism
- Credit and Financial Services
- Defence
- Digital Infrastructure and Data Processing or Storage
- Land and Real Estate critical to the above infrastructure
It is noted that any subsequent increase in the Special Participation Threshold from less than 25% to 25% or more, or from less than 50% to 50% or more, triggers a mandatory notification, regardless of the transaction value.
Where the obligation to make an FDI filing is triggered, then this needs to be filed prior to the completion of the transaction.
Article 8 of the Law clarifies that Contracts and/or agreements and/or legal transactions relating to acts for which prior approval by the Ministry of Finance is required shall be deemed to be subject to the suspensive condition of obtaining such approval. This means that any agreement that requires such prior approval will only take effect once that approval has been obtained.
3. Discretionary Powers
The Law grants the Ministry of Finance discretionary authority to review any transaction, even if it does not meet the mandatory notification thresholds, where there are reasonable grounds to believe the transaction could affect national security or public order.
The Ministry of Finance may trigger this discretionary power:
- Within 15 months from completion for investments not subject to a mandatory filing
- Within 5 years from completion for investments that were subject to mandatory filing and should have been filed but were not.
4. Timeframes for Assessment
- Within 20 working days of receiving a complete FDI application, the Ministry will decide whether the investment will undergo screening.
- During this period, the Ministry may request additional information, explanations, or clarifications, which suspends the 20-day period until the information is provided.
- If the Ministry clears the investment after initial review, it must communicate the decision within 5 days.
- If an in-depth screening is required, the Ministry must notify the investor within five days of deciding to initiate it, with a review period of 65 days.
The decisions of the competent authority, made pursuant to the provisions of this Law, constitute administrative acts and are subject to appeal before the Administrative Court under Article 146 of the Constitution.
Foreign investors in Cyprus should submit notifications before completing an investment and obtain approval when required. Pay attention to thresholds for shareholding, transaction value, and involvement in strategic sectors, as well as the possibility of discretionary review by the Ministry of Finance. Early planning and professional legal guidance can help ensure a smooth and compliant investment process.