Cyprus Introduces a New Foreign Direct Investment (FDI) Screening Regime

Effective from 2 April 2026, Cyprus has implemented the Establishment of a Framework for the Screening of Foreign Direct Investments Law of 2025 (Law 194(I)/2025). This legislation introduces, for the first time, a mandatory screening mechanism for certain foreign investments that may affect the security or public order of the Republic of Cyprus. It also aligns Cyprus with Regulation (EU) 2019/452 and the approach already adopted by many other EU Member States.

Executive Summary

The new regime represents an important change for international investors, private equity funds, multinational companies and professional advisers involved in cross-border transactions. Where the statutory criteria are met, prior approval from the Ministry of Finance must be obtained before a transaction can complete. Failure to consider the new rules at an early stage may lead to delays, additional costs or regulatory consequences.

When is Notification Required?

A notification will generally be required where:
• the investor is a non-EU/EEA/Swiss investor or an EU entity controlled by a third-country investor;
• the investment concerns a strategically important undertaking operating in a sensitive sector;
• the investment has a value of €2 million or more; and
• the transaction results in the acquisition of a qualifying participation under the Law.

The legislation also requires notification in certain cases where an existing foreign investor increases its holding to or above the statutory ownership thresholds of 25% or 50%.

Which Sectors are Affected?

The Law applies to businesses operating in strategic sectors including energy, transport, water, health, communications, financial services, defence, artificial intelligence, cybersecurity, data processing, digital infrastructure and other critical technologies. Each transaction should be assessed on its own facts to determine whether the target falls within the scope of the legislation.

Practical Implications for Investors

The FDI regime is suspensory. This means that transactions requiring notification cannot complete until approval has been granted by the Ministry of Finance. Investors and their advisers should therefore consider FDI requirements during the due diligence stage and ensure that transaction documents contain appropriate Conditions Precedent. The review period is generally 20 working days for a complete application, although this may be extended where additional information is requested.

Our Recommendation

Businesses contemplating acquisitions, investments or corporate restructurings in Cyprus should seek legal advice as early as possible. An initial assessment can determine whether the transaction falls within the scope of the new legislation, allowing parties to structure the transaction efficiently and avoid unnecessary delays.

How Vera Lyssiotis LLC Can Assist

Our Corporate and Commercial team advises international investors, family offices, entrepreneurs and foreign law firms on mergers and acquisitions, cross-border investments, corporate structuring, regulatory compliance and real estate transactions in Cyprus.

We assist with:
• FDI screening assessments
• Preparation and submission of notifications
• Corporate and commercial advice
• Legal due diligence
• Drafting and negotiating transaction documents
• Regulatory compliance and ongoing corporate support.

Disclaimer

This publication is intended for general information purposes only and does not constitute legal advice. Specific legal advice should always be obtained before proceeding with any investment or transaction.

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