Cyprus FDI Screening Regime
The new mandatory pre-approval framework for foreign direct investments under Law 194(I)/2025, effective 2 April 2026. What non-EU investors and Cyprus-based businesses need to know.
Key Parameters at a Glance
- Regime: Mandatory prior notification and approval for qualifying foreign investments
- Competent authority: Ministry of Finance
- Ownership threshold: ≥25% of share capital and/or voting rights (or equivalent decisive influence)
- Value threshold: €2 million or more (aggregated over 12 months)
- Sectors: Broad — energy, transport, health, education, tourism, financial services, critical technologies, defence, media, data processing, and more
- Review timeline: Phase 1: 20 working days · Phase 2: 65 working days
- Penalties: Fines from €5,000 up to €100,000 + daily penalties of up to €8,000
- Call-in power: Up to 5 years post-completion for missed mandatory filings
- Effective date: 2 April 2026
- Legislative basis: Law 194(I)/2025, transposing EU Regulation 2019/452
Section 1 — Overview
On 14 November 2025, the Establishment of a Framework for the Screening of Foreign Direct Investments Law of 2025 (Law 194(I)/2025) was published in the Official Gazette, creating Cyprus’s first-ever national FDI screening regime. The law entered into force on 2 April 2026.
The new framework introduces a mandatory pre-approval requirement for certain foreign investments into Cypriot businesses operating in strategically sensitive sectors. The Ministry of Finance is designated as the competent screening authority.
By 2025, Cyprus was one of only two EU member states — alongside Croatia — that had not adopted national FDI screening legislation. With the European Commission pushing to make screening mandatory across the bloc, and neighbouring Greece having enacted its own regime in May 2025, Cyprus could no longer hold the line. The Cypriot parliament passed Law 194(I)/2025 on 30 October 2025. The law transposes EU Regulation 2019/452 into national law and integrates Cyprus into the EU-wide cooperation mechanism for the exchange of information between member states and the European Commission on investments that may affect strategic interests.
In practical terms, this means that FDI analysis now needs to be built into the front end of deal planning — not treated as a late-stage regulatory filing issue.
Section 2 — Who Is a “Foreign Investor”?
The law targets investments by foreign investors, which the law defines broadly:
Definition — Foreign Investor
(a) Any natural person who is not an EU, EEA, or Swiss national, and who intends to make or has made a foreign direct investment in Cyprus.
(b) Any legal entity established in a third country (outside the EU, EEA, or Switzerland) that makes or plans to make such an investment.
Look-through rule: EU-incorporated entities are also caught if their ultimate beneficial ownership or control rests with persons or entities outside the EU, EEA, or Switzerland. A Dutch holding company ultimately owned by a non-EU individual falls within scope. The law looks through the chain of ownership to identify the source of control.
The regime does not affect straightforward investments by EU/EEA or Swiss nationals or entities operating through standard structures. A German company acquiring a stake in a Cyprus business through an ordinary corporate structure is not caught.
Section 3 — When Does the Notification Obligation Arise?
A mandatory notification is triggered only when all three of the following conditions are met cumulatively:
| Condition | Requirement |
|---|---|
| (i) Special Participation | The transaction results in the foreign investor acquiring at least 25% of the share capital and/or voting rights, or otherwise obtaining decisive influence over the target. This can be achieved directly or indirectly, whether acting alone or jointly with others. |
| (ii) Investment Value | The value of the investment is €2 million or more, calculated across all transactions between the same parties within a 12-month window from the scheduled investment date. |
| (iii) Strategic Sector | The target is an undertaking of strategic importance — i.e. it operates in one or more of the sensitive sectors defined in the law’s Annex (see Section 4 below). |
Exception — Threshold Crossings Regardless of Value
If a foreign investor already holds a stake and is increasing it to cross either the 25% or 50% threshold, notification is required regardless of the transaction value. A €500,000 top-up that takes a stake from 24% to 26% is caught. This prevents gradual accumulation of influence as a route to avoiding the regime.
Section 4 — Which Sectors Are Covered?
The definition of “strategic importance” is deliberately broad. It draws from Article 4 of EU Regulation 2019/452 and is supplemented by a Cyprus-specific Annex that extends further than most EU counterparts.
| Category | Sectors and Activities |
|---|---|
| Critical Infrastructure | Energy networks, transport, water, health, communications, media, data processing and storage, aerospace, defence, electoral infrastructure, financial services |
| Critical Technologies | Artificial intelligence, robotics, semiconductors, cybersecurity, quantum technologies, nuclear technologies, nanotechnologies, biotechnologies, space technologies |
| Dual-Use Goods | Items as defined in Council Regulation (EC) No 428/2009 |
| Essential Inputs | Energy, raw materials, food security |
| Sensitive Data | Entities with access to personal data at scale |
| Media | Media pluralism and freedom of information |
| Cyprus-Specific Additions | Education, tourism, and land/real estate critical to key infrastructure |
Important
A company does not need to be exclusively active in a listed sector. If any part of its activities falls within scope, it may qualify as an undertaking of strategic importance. The Ministry of Finance is expected to adopt a broad interpretation, consistent with the approach taken by other EU screening authorities.
There is one explicit carve-out: transactions involving the purchase, sale, or construction of vessels are exempt. This exemption does not extend to floating storage and regasification units (FSRUs), which remain in scope due to their energy security relevance.
Section 5 — The Review Process
The process operates in two phases. The foreign investor must submit a written notification to the Ministry of Finance before completion of the investment.
Phase 1 — Preliminary Assessment
The Ministry of Finance has 20 working days from receipt of a complete notification to decide whether the investment warrants a full screening. During this phase, the authority may grant unconditional clearance or escalate to Phase 2. The decision to proceed to full review must be notified to the investor within 5 working days of being made.
Phase 2 — Full Screening
If the investment proceeds to full review, the authority must reach a final determination within 65 working days. Possible outcomes are unconditional approval, approval subject to conditions, prohibition of the transaction, or an order to reverse a transaction that has already been completed without authorisation.
Key Assessment Factors
In assessing whether an investment affects public order or security, the authority will consider factors including:
(i) Whether the investor is directly or indirectly controlled by a third-country government, through ownership or significant financing.
(ii) Whether the investor is already involved in strategic sectors in other EU member states.
(iii) Whether there is a serious risk of criminal activity.
(iv) Whether the transaction could affect the supply of critical services or inputs to Cyprus or the EU.
No Deemed Approval
Both timelines may be suspended if the authority requests additional information. Clearance is effective only once written approval is issued — there is no deemed approval through the passage of time. Investors should not assume silence equals consent.
Section 6 — Call-In Powers and Retrospective Review
The authority retains the power to review transactions even where they fall outside the mandatory notification criteria, provided there are reasonable grounds to believe the investment may affect security or public order.
| Scenario | Review Window |
|---|---|
| Non-notifiable investment — transaction did not meet the three cumulative conditions but may still raise concerns | Up to 15 months after completion |
| Missed mandatory filing — transaction should have been notified but was not | Up to 5 years after completion |
This retrospective reach is one of the regime’s most consequential features. Investors cannot assume that a completed transaction is safe simply because no filing was made at the time. The 5-year window for missed filings was extended from an initial draft proposal of 15 months.
Section 7 — Penalties for Non-Compliance
The penalty framework is designed to ensure compliance is taken seriously:
| Violation | Fine Range |
|---|---|
| Failure to notify a covered investment | €5,000 – €50,000 |
| False or misleading information in the notification | Up to €100,000 |
| Failure to provide requested information | Up to €50,000 |
| Non-compliance with imposed conditions or measures | Up to €100,000 |
| Continuing breach (daily penalty) | Up to €8,000 per day |
Beyond financial penalties, the authority may restrict the exercise of rights arising from the investment — including voting, management, and control rights — and may order the transaction to be unwound entirely. Decisions of the competent authority constitute administrative acts under Article 146 of the Constitution and are subject to judicial review before the Administrative Court.
Note on Penalty Amounts
Some published commentary cites higher fine ranges (up to €500,000 or €1,000,000 for certain violations). The figures above reflect the ranges most consistently reported across multiple legal analyses of the enacted law. Investors should verify the applicable penalty provisions directly against the published text of Law 194(I)/2025 and any implementing regulations.
Section 8 — Practical Implications
For Foreign Investors
FDI clearance becomes a mandatory pre-closing step for covered transactions. This must be factored into transaction timelines and long-stop dates from the outset. Investors should expect to provide detailed information about their ownership chain, beneficial owners, source of funds, business activities in Cyprus and abroad, connections to third-country governments or sensitive projects, and any prior sanctions or criminal records.
For Cyprus-Based Companies and Their Advisers
Any Cyprus business operating in a listed sector that receives investment interest from non-EU parties will need to assess whether the FDI regime applies before the transaction can proceed. This includes companies in financial services, technology, data processing, tourism, education, and energy — sectors that represent a significant portion of the Cyprus economy. The law also captures entities that are not established in Cyprus but supply goods or services into Cyprus within covered sectors.
For Transaction Documentation
Share purchase agreements, joint venture agreements, and other M&A documentation will need to incorporate FDI-related provisions:
Documentation Considerations
- Conditions precedent: FDI clearance as a CP to completion
- Long-stop dates: Extended to accommodate the potential 85+ working day review timeline (Phase 1 + Phase 2 + any suspensions)
- Information-sharing obligations: Buyer’s obligation to provide information necessary for the notification
- Regulatory risk allocation: Who bears the risk if clearance is denied or conditions are imposed
- Interim covenants: Restrictions on target business conduct during the review period
- Break fees: Consideration of break fee or reverse break fee provisions tied to regulatory outcomes
Section 9 — Filing Information Requirements
The notification must include information mirroring Article 9 of EU Regulation 2019/452:
Required Filing Information
- Ownership structure and full chain of beneficial ownership of the investor
- Value and financing of the investment, including source of funds
- Business activities of both the investor and the target, in Cyprus and abroad
- Markets in which the investor and target operate
- EU member states in which the investor is active
- Turnover and employee numbers of both investor and target
- Sanctions and criminal record history
- Involvement in EU-wide sensitive projects
- Intended completion date of the investment
Outstanding — Implementing Regulations
The Ministry of Finance is expected to issue implementing regulations, including the notification application form and detailed procedural guidance. These will clarify practical aspects of the filing process. Investors and advisers should monitor the Ministry of Finance’s FDI screening page at gov.cy/mof for updates.
Disclaimer
This article is for general informational purposes only and does not constitute legal, tax, or professional advice. The FDI screening regime involves legal assessments that require specialist legal counsel. The information is based on Law 194(I)/2025 as published in the Official Gazette on 14 November 2025, publicly available guidance from the Ministry of Finance, and published legal commentary as of April 2026. The law and its interpretation may be subject to change, including through implementing regulations or administrative practice. Readers should seek professional advice tailored to their specific circumstances before acting on the content of this article. Constantinos Markou & Co Ltd accepts no liability for any loss or damage arising from reliance on the information contained herein.
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