Introduction
Legislation. The Law on the Establishment of a Framework for the Screening of Foreign Direct Investment of 2025 (the FDI Law) introduces a mandatory screening process for foreign direct investments in critical sectors in Cyprus.
Implementation of EU Regulation. The FDI Law is intended to implement Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union. The definition of foreign direct investment (FDI) under the FDI Law is identical to that in the Regulation.
Notification obligation and suspensory effect. When the thresholds under the FDI Law are met, an FDI transaction in Cyprus must be notified to the competent authority and be cleared prior to its implementation. Any FDI that requires clearance under the FDI Law is statutorily considered to be subject to the condition precedent of receiving such approval.
Screening authority. The FDI Law designates the Ministry of Finance as the competent authority for its implementation (the FDI Authority). The FDI Authority is empowered to screen, and potentially prohibit, inbound FDI deemed to pose a risk to the security or public order of the Republic of Cyprus. A Consulting Committee is also established under statute, to provide information and advice to the FDI Authority.
Entry into force. The FDI Law enters into force on 2 April 2026.
Scope
Foreign investor
A foreign investor for the purposes of the FDI Law is:
- a natural person who is a citizen of a third country (i.e. a state outside the European Union (EU), the European Economic Area (EEA) or Switzerland)
- any undertaking domiciled, registered, or having its principal place of business in a third country
- any EU-based undertaking directly or indirectly controlled by a third-country national or a third-country entity (i.e. through the exercise of decisive influence, by means of ownership, contractual rights or de facto).
Natural persons holding dual citizenship (of an EU Member State and a third country) are not considered foreign investors for the purposes of the FDI Law.
Notification triggers
An FDI will be subject to screening under the FDI Law if it meets three cumulative tests:
- It results in the acquisition of a special participation;
- It meets the value threshold of two million euro (€2,000,000) (save for cases where an existing special participation is increased over 25% or 50%); and
- It concerns a strategically important undertaking.
Considering these cumulative criteria separately:
Special participation
For the purposes of the FDI Law, a “special participation” is the acquisition, by a foreign investor, of:
- 25% or more of the share capital or voting rights in the target undertaking; and/or
- the ability to exercise decisive influence over the activities of the target undertaking.
The foreign investor may acquire this participation directly or indirectly, and acting individually or in concert with others.
Value threshold
An FDI must have a value of two million euro (€2,000,000) or more to be caught by the FDI Law (save to exceptions discussed below).
The value threshold can be met by the transaction individually, or in conjunction with other transactions taking place between the same parties within 12 months from the date on which the FDI is intended to be implemented.
Irrespective of the transaction value, a notification would be mandatory if an existing foreign investor increases their participation in a target undertaking and crosses specific thresholds:
- from less than 25% to 25% or more; or
- from less than 50% to 50% or more.
Strategically important undertakings
An FDI transaction is subject to the FDI Law if it concerns “strategically important undertakings”, namely undertakings which are active or will be active in infrastructure (physical or virtual) in critical sectors, including the following:
- energy
- transport (ports, airports)
- aerospace
- water
- health
- communications
- media
- data processing or storage
- defence
- election services
- credit and financial services (including systemic credit institutions)
- critical infrastructure
- real estate of major importance for the use of critical infrastructure in any of the above-mentioned sectors.
Other than floating storage and regasification units (FSRUs), FDI concerning ships under construction or ships being purchased/sold are exempted from the FDI Law.
Screening
The criteria taken into account by the FDI Authority in reviewing a notified FDI comprise a two-part assessment to determine whether the investment is likely to affect the security or public order of the Republic of Cyprus.
The assessment considers the following factors (on a non-exhaustive basis):
- whether the undertaking is active in a sector of strategic importance (as discussed above, including energy, transport (ports, airports), aerospace, water, health, communications, media, data processing/storage, aerospace, defence, electoral or financial services (including systemic credit institutions), and critical infrastructure
- whether critical technologies and dual-use items are involved, including AI, robotics, semiconductors, cybersecurity, quantum and nuclear technologies, and biotechnology
- whether the supply of critical inputs is affected, including the security of energy, raw materials, or food supplies
- whether the access to sensitive information may be impacted, including personal data and the ability to control such information
- whether media freedom and pluralism may be affected.
The FDI Authority also assesses:
- foreign government control: whether the foreign investor is directly or indirectly controlled by the government of a third country (including state bodies or armed forces) or through significant financing
- track record of the foreign investor: whether the investor has previously been involved in activities affecting the security of another EU Member State, or if there is a serious risk of the investor engaging in illegal or criminal activities.
- wider EU impact: the extent to which the investment may affect the security or public order of another EU Member State or impact a project of Union interest (taking into account any opinions from the European Commission or other Member States).
Timelines
Review timeline
- Notification: Must be submitted before implementation (defined as the fulfillment of the final condition precedent).
- Phase I: The FDI Authority has 20 working days to either grant unconditional approval or initiate a full screening.
- Phase II: If a full screening is initiated, the FDI Authority has 65 working days to issue a final determination (approval, conditional approval, or prohibition).
These timelines are suspended if the FDI Authority requests more information. Approval is only valid when issued in writing; there is no tacit approval.
Upon completing a screening, the FDI Authority may approve the FDI transaction unconditionally or subject to specific terms and conditions.
Ex post screening
The FDI Authority has two ex-post powers:
- 5-Year “Look-Back”: For any transaction that was subject to mandatory notification but was not notified, the FDI Authority may screen the transaction within 5 years from implementation of the transaction.
- 15-Month “Call-in”: For any transaction that was not subject to mandatory notification, the FDI Authority may call-in the transaction for screening within 15 months from implementation of the transaction.
Sanctions
Power to unwind
If the FDI Authority deems the investment a threat to security or public order, or if the investor fails to comply with any conditions imposed to the FDI on approval, the FDI Authority has the power to prohibit, terminate, or unwind the investment.
In the event of a prohibition, termination, or unwinding—or for as long as an investor fails to comply with imposed conditions—the foreign investor (and any persons controlled by or acting in concert with them) is blocked from exercising any rights stemming from the investment. This explicitly includes any voting rights, management rights, or control rights over the target undertaking.
Any transaction that falls within the FDI Law’s scope but fails to be notified is automatically considered an infringement of the FDI Law, granting the FDI Authority the right to prohibit or unwind it.
Administrative fines
Lastly, the FDI Authority may impose administrative fines on a foreign investor, or any person controlling the investment, for specific violations of the FDI Law (separate to the power to unwind a transaction):
- A fine between €5,000 and €50,000 for failure to notify a qualifying transaction.
- A fine of up to €100,000 for providing false or misleading information to the FDI Authority.
- A fine of up to €50,000 for failing to provide required information.
- A fine of up to €100,000 for failing to comply with any measure or condition ordered by the FDI Authority, supplemented by an additional fine of up to €8,000 for each day the violation continues.
How we can help
Navigating this new regime requires careful analysis and strategic planning to ensure transactional certainty. Antoniou McCollum & Co. is positioned to provide comprehensive legal support to foreign investors, including:
- Transactional assessment: Providing early-stage advice on whether a proposed transaction triggers the notification requirements.
- Due diligence: Conducting specialised due diligence on target undertakings to determine if they fall within the “strategically important” categories.
- Notification of FDI transaction: Preparing the complete notification file and managing all correspondence and information requests from the FDI Authority.
- Negotiation of remedies: Advising on and negotiating potential conditions or remedies with the FDI Authority to ensure the transaction is approved.
Contact us to discuss your precise requirements.
This update is intended for informational purposes only and does not constitute legal advice.