Foreign Direct Investment Screening Framework in Cyprus

Cyprus has introduced a new Foreign Direct Investment (FDI) Screening Framework under Law 194(I)/2025, which came into effect on 2 April 2026. This mandatory regime aligns Cyprus with EU standards (Regulation (EU) 2019/452) and establishes a pre-approval process for foreign investments in strategically sensitive sectors. The framework aims to safeguard national security and public order while maintaining Cyprus’ investor-friendly profile, ensuring that foreign investments contribute positively to the economy without compromising critical interests.

Key Features of the FDI Screening Framework:

1. Scope and Notification Requirements for Foreign Investors subject to the Framework:

- Non-EU/EEA/Swiss nationals (individuals)

- Legal entities established outside the EU/EEA/Switzerland

- EU/EEA/Swiss entities controlled by third-country investors (directly or indirectly, with ≥25% foreign ownership)

Investors must notify the Ministry of Finance before completing any investment, submitting a fully completed written application containing detailed information such as investment description and value, ownership structure, financing sources and business activities.

2. Triggering Conditions

All of the following conditions must be met to trigger the screening process:

- Investor status as a Foreign Investor

- Acquisition or increase of ≥25% share capital or voting rights

- Investment value of at least €2 million (single or cumulative over 12 months)

- Investment in a strategic sector

3. Strategic Sectors Covered

The framework focuses on sectors critical to national security and public order, including:

- Critical Infrastructure: Energy, Transport, Communications, Water, Health, Education, Tourism, Financial services

- Strategic Technologies: AI, Robotics, Semiconductors, Cybersecurity, Quantum and nuclear tech, Biotechnology, Nanotechnology, Dual-use items

- Sensitive Activities: Access to sensitive information, Media freedom, Data processing/storage, Electoral and financial infrastructure, Critical raw materials, Food security, Defence, Real estate linked to critical infrastructure

4. Review Process and Timelines

The screening process consists of two phases:

Phase I: 20 working days from complete application submission, resulting in Unconditional Approval or initiation of Phase II

Phase II: 65 working days (if initiated), leading to Approval, Conditional Approval, or Prohibition

Note that timelines are suspended if additional information is requested and resume upon submission.

5. Compliance Risks and Penalties

Non-compliance carries significant risks, including:

- Administrative fines ranging from €5.000 to €100.000, depending on severity

- Daily penalties for ongoing breaches

- Suspension of voting or management rights

- Transaction reversal for prohibited or non-compliant investments

The Ministry of Finance also holds retrospective review powers, allowing it to examine unnotified investments within five (5) years of completion and non notifiable investments within fifteen (15) months if national security or public order concerns arise.

6. Strategic Implications for Investors

Early Assessment: Critical to determine filing obligations at the outset of any transaction

Condition Precedent: FDI approval should be incorporated as a closing condition in transaction documents

Timeline Planning: Investors should anticipate an additional 20 to 85+ working days for the screening process, impacting deal schedules

Sector Clarity and Control Analysis: Due diligence on target undertakings and ownership structures (including UBO assessment) is essential to assess “Foreign Investor” status

Coordination: Align FDI screening with other regulatory approvals, such as competition and sectoral regulators

7. Next Steps for Investors and Advisors

- Assess transactions against the four (4) Triggering Conditions to determine notification requirements

- Engage advisors early to prepare comprehensive applications with all necessary documentation

- Plan transaction timelines to accommodate the review periods

- Monitor ongoing guidance and implementation updates from the Ministry of Finance