Overview of Cyprus’ New Foreign Investment Screening Regime
Cyprus has enacted Law 194(I)/2025, establishing a national foreign direct investment (FDI) screening mechanism in line with Regulation (EU) 2019/452. The new framework will apply from 2 April 2026 and introduces a formal review process for certain foreign investments affecting national security or public order.
While the legislation aligns Cyprus with the broader EU FDI architecture, it represents a material regulatory development for investors, private equity sponsors, and M&A practitioners involved in Cyprus-related transactions. The regime requires careful consideration at the structuring stage, particularly where strategic sectors are involved.
A. Scope of Application: Substance Over Form
The Foreign Investment Screening Regime applies to investments made by individuals or entities established outside the EU, EEA, or Switzerland. However, the legislation extends beyond direct foreign acquirers.
EU-incorporated vehicles will also fall within scope where:
- A non-EU/EEA/Swiss investor holds 25% or more of the share capital or voting rights;
- A foreign investor exercises control; or
- The ultimate beneficial ownership rests outside the EU/EEA/Switzerland.
The law further captures entities that are not established in Cyprus but provide goods or services into Cyprus within sectors regarded as sensitive.
Importantly, the regime looks at ultimate ownership and effective control, not merely incorporation. The use of EU holding structures will not prevent scrutiny if the beneficial owner is based outside the qualifying jurisdictions. Likewise, incremental or minority acquisitions may still give rise to notification requirements.
B. When Is Notification Required?
A mandatory filing arises where specific criteria are met.
1. Activity in a Sensitive Sector
The target must operate in a designated strategic area. These include, among others:
- Energy and critical infrastructure
- Defence and security
- Financial services
- Advanced technologies such as artificial intelligence, semiconductors and cybersecurity
- Healthcare
- Transport
- Media and communications
Given the breadth of these categories, many technology, infrastructure and regulated businesses may fall within scope.
2. Acquisition of a Qualifying Stake
A filing obligation is triggered where:
- The investment reaches or exceeds 25% of share capital or voting rights; or
- An existing participation increases beyond the 25% or 50% threshold.
Crossing these ownership levels activates the review requirement irrespective of transaction value.
3. Transaction Value Threshold
Where the investment equals or exceeds €2 million within a rolling 12-month period between the same parties, notification is required. This financial threshold does not apply where the shareholding thresholds are crossed.
The legislation discourages artificial fragmentation of transactions. Staged investments or valuation structuring may not prevent the obligation to notify.
C. Review Procedure and Timing
The Ministry of Finance is the competent authority responsible for assessing notifications.
The process includes:
- Initial review (Phase 1): up to 20 working days from submission of a complete filing.
- Extended review (Phase 2): up to an additional 65 working days where a detailed assessment is necessary.
Both timeframes may be suspended if the authority requests supplementary information.
At the conclusion of its assessment, the Ministry may:
- Approve the transaction unconditionally;
- Approve subject to conditions; or
- Prohibit the investment.
There is no automatic approval mechanism. Formal written clearance is required before completion where the transaction is notifiable.
Where Phase 2 is initiated, the process may extend beyond three months. Transaction documentation should therefore incorporate appropriate conditions precedent, long-stop dates and interim covenants to manage timing risk.
D. Ex Officio Review Powers
The regime includes retroactive review authority.
The Ministry may initiate proceedings:
- Within five years following completion where a notifiable transaction was not filed; and
- Within fifteen months for investments below the financial threshold if concerns arise regarding security or public order.
This five-year window creates ongoing post-closing exposure. Structuring below the monetary threshold does not eliminate potential regulatory intervention.
E. Sanctions and Enforcement
Failure to comply with the legislation may result in administrative penalties, including:
- Monetary fines for non-notification;
- Sanctions for inaccurate or misleading submissions;
- Penalties for failure to cooperate with information requests; and
- Fines and daily penalties for breach of imposed conditions.
Decisions may be challenged before the Administrative Court through judicial review proceedings.
F. Practical Implications for Investors and Advisors
The introduction of a national FDI regime represents a substantive shift in the Cyprus regulatory landscape. The combination of relatively low ownership thresholds, broad sectoral coverage and retrospective review powers means that foreign investment analysis will need to form part of standard due diligence for Cyprus-facing transactions.
Technology businesses, infrastructure operators, financial institutions and defence-adjacent entities are particularly likely to be affected. Early regulatory assessment will be critical to avoid execution delays and post-completion uncertainty.
From April 2026 onwards, FDI risk analysis will become a routine component of cross-border deal structuring involving Cyprus.
G. How We Can Assist You
At Andria Papageorgiou Law Firm, we advise investors, corporate groups, and transaction stakeholders on the regulatory implications of cross-border investments involving Cyprus. With the introduction of the Cyprus FDI screening regime, early-stage regulatory assessment has become a critical component of transaction planning.
We support clients by:
- Conducting FDI risk assessments at the structuring stage
- Advising on notification obligations and filing strategies
- Preparing and submitting FDI notifications to the competent authority
- Coordinating with foreign counsel in multi-jurisdictional transactions
- Drafting transaction documentation to address regulatory conditions, long-stop dates, and interim covenants
- Advising on post-closing exposure and compliance with imposed conditions
Our approach is commercially focused and transaction-driven, ensuring that regulatory considerations are integrated seamlessly into deal execution while protecting our clients’ strategic objectives.
Should you wish to assess how the new FDI regime may impact your current or upcoming transactions, we would be pleased to assist.
Should you wish to discuss how these developments may affect your organisation, please do not hesitate to contact us.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any matter. Andria Papageorgiou Law Firm is not responsible for any actions (or lack thereof) taken as a result of relying on or in any way using information contained in this article and in no event shall be liable for any damages resulting from reliance on or use of this information.
