Cyprus has introduced its first national framework for the screening of Foreign Direct Investments (“FDI”). Its purpose is the establishment of a structured screening mechanism to assess whether FDIs made by foreign investors in sectors of strategic importance or sensitivity, pose risks to national security or public order.
As of 2 April 2026, when Law 194(I)/2025 (the “FDI Law”) comes into force, foreign investors will be obligated to submit a written notification to the Ministry of Finance (the “Competent Authority”) and receive approval prior to making a qualifying FDI in Cyprus.
This Article outlines which investments fall under the scope of the FDI Law and the factors the Competent Authority takes into consideration when making its assessment.
Who is a foreign investor? Foreign investors are natural or legal persons originating from outside the EU, the EEA and Switzerland.
What qualifies as a FDI under the FDI Law? The relevant FDI must meet all the following conditions:
- Effective Participation: The transaction will result in the foreign investor acquiring, directly or indirectly, (i) at least 25% of the share capital or voting rights in the target enterprise or (ii) a corresponding ability to exercise decisive influence over the activities of the target enterprise; and
- The Value of the FDI amounts to at least €2 million, either through a single transaction or over multiple transactions between the same parties made over the 12-month period commencing from the date the FDI is scheduled to be completed; and
- Critical Infrastructure: The FDI relates to an enterprise operating in a sector of strategic importance, as outlined below.
Which sectors are considered as strategically important or sensitive? These are sectors deemed as “critical infrastructure”, including: Energy, Water, Transport, Communications, Media, Aerospace, Electoral or Financial Infrastructure, Healthcare, Data Processing or Storage, Education, Tourism, Defense, Sensitive Facilities, and Land and Real Estate crucial for the use of such critical infrastructure.
What obligations does the FDI Law introduce? Provided there is a qualifying FDI, foreign investors will be obligated to submit a written notification to the Competent Authority and receive approval prior to making a FDI in Cyprus. The FDI Law outlines what information must be provided in the notification.
It is noted that a notification is required even where an investment is made through an EU-based entity, provided that a foreign investor (i) is the UBO of such entity and/or (ii) holds at least 25% of the share capital or voting rights in such entity and/or (iii) directly or indirectly controls the relevant entity.
A notification obligation is also required where an existing participation increases (i) from below 25% to 25% or more, or (ii) from below 50% to 50% or more, irrespective of the investment value.
Are any investments expressly excluded? The FDI Law does not apply to investments involving ships under construction or ships subject to sale or purchase, except for floating storage and regasification units (FSRUs) for natural gas, which remain within scope.
What does the Competent Authority take into consideration when assessing whether the FDI may potentially affect national security and public order? The following factors are considered, among others:
- Whether the foreign investor is controlled, directly or indirectly, by the government of a third country;
- Whether the foreign investor has already been involved in activities which affect the security or public order of another Member State;
- Whether there is a serious risk that the foreign investor conducts illegal or criminal activities; and
- Relevant comments made by another Member State or the European Commission.
What powers does the Competent Authority have? The powers of the Competent Authority include:
- approving the investment (with our without conditions) or prohibiting, unwinding or restricting transactions considered detrimental to national security or public order;
- screening any FDI, even if it is not within the scope of mandatory notification, provided there are grounds to suspect that the investment may affect national security and public order;
- imposing administrative sanctions and/or pursuing legal action for a prohibition order and/or an injunction.
Next Steps for Investors: Foreign investors must be proactive in conducting early assessments to ascertain whether the proposed FDI falls within the scope of the FDI Law. The notification obligation connected to the new FDI screening mechanism should be seen as a critical additional point on an investor’s compliance checklist.
The information contained in this article is provided for informational purposes only and should not be relied upon or construed as legal advice on any matter. The information provided is valid as at the time of publishing and may not reflect the most current legal developments. Should you require legal advice, please contact us directly.
