CYPRUS CORPORATE & M&A LEGAL UPDATE
Foreign Direct Investment Screening in Cyprus: What Investors and Dealmakers Need to Know
Cyprus’ foreign direct investment screening regime has been in force since 2 April 2026, pursuant to the Establishment of a Framework for the Screening of Foreign Direct Investments Law of 2025 (Law 194(I)/2025).
The Law establishes a mandatory prior notification and screening framework for foreign direct investments falling within its scope, with the screening process aimed at assessing whether such investments may affect the security or public order of the Republic of Cyprus. The Ministry of Finance, acting as the competent Screening Authority, has published Guidance on the FDI screening framework and the prescribed Notification Form, both dated 28 July 2026.
For corporate transactions potentially falling within the scope of the Law, FDI screening should therefore form part of the regulatory analysis at an early stage, alongside merger control, sector-specific approvals and any other applicable regulatory requirements.
When is prior notification required?
Under Law 194(I)/2025, a foreign direct investment is subject to mandatory prior notification where the following statutory criteria are cumulatively satisfied:
- the investment results in the acquisition of a qualifying holding, directly or indirectly, individually or acting in concert with other persons, representing at least 25% of the share capital and/or voting rights of the relevant undertaking, or an equivalent ability to exercise decisive influence over its activities;
- the value of the investment is at least €2 million, whether considered individually or together with other transactions between the same parties within a period of 12 months from the date on which the investment is intended to be made; and
- the investment concerns an undertaking of strategic importance, as defined under the Law.
The Law also provides for mandatory notification where a further acquisition results in a foreign investor’s participation crossing the 25% or 50% threshold, irrespective of the value of the investment.
Which undertakings are considered strategically important?
An undertaking will be regarded as being of strategic importance where it carries out activities falling within the strategically sensitive sectors specified in the Annex to the Law. In determining whether this criterion is met, regard must be had to the actual activities carried out by the relevant undertaking in the Republic of Cyprus.
These include critical infrastructure, whether physical or virtual, in areas such as energy, transport, water, health, education, tourism, communications, media, data processing or storage, aerospace, defence, electoral or financial infrastructure, including systemically important credit institutions, as well as sensitive facilities and land or real estate crucial for the use of such infrastructure.
The relevant activities also include critical technologies and dual-use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies, as well as the supply of critical inputs, including energy, raw materials and food security, access to sensitive information, including personal data, and media freedom and pluralism.
Whether a particular undertaking falls within these categories is a fact-specific assessment. It is not sufficient to rely solely on the general description of the undertaking, the sector in which its wider group operates or the way in which the transaction is characterised. The actual nature and scope of the activities carried out by the undertaking in Cyprus must be considered.
Why does this matter for M&A transactions?
Where an investment falls within the mandatory notification regime, it must be notified to the competent Screening Authority prior to completion and may not be completed before the Screening Authority has issued its decision.
This has direct implications for transaction planning. FDI screening should be considered as part of the regulatory due diligence process and, where applicable, appropriately reflected in the transaction timetable, conditions precedent, long-stop date and completion mechanics of the relevant acquisition or investment agreement.
The notification must contain the information prescribed by the Law in relation to the proposed investment, including information concerning the parties, their ownership structures and ultimate beneficial ownership, the approximate value and financing of the investment, the relevant business activities and the proposed completion date. The Screening Authority may request additional information or clarification where required. Importantly, the initial 20-working-day period within which the Screening Authority determines whether the notified investment will undergo screening runs from receipt of a fully completed application. Where additional information or clarification is requested, the applicable timeframe is suspended until the requested information is submitted.
The practical takeaway
FDI screening should not be treated merely as an administrative filing to be addressed at the end of the transaction process. Where the regime may apply, it can have a direct impact on the structure, documentation, timing and completion of the transaction.
For transactions potentially falling within the scope of Law 194(I)/2025, the screening analysis should therefore be undertaken at the structuring and due diligence stage, enabling the parties to identify any notification and approval requirements at an early stage and to reflect the regulatory process appropriately in the transaction documentation and completion timetable.
Mylonas Law advises domestic and international investors, businesses and corporate groups on mergers and acquisitions, foreign investment, corporate structuring, regulatory matters and cross-border transactions in Cyprus.
This publication is intended for general information purposes only and does not constitute legal advice. Whether an investment falls within the FDI screening regime must be assessed by reference to the circumstances of the particular transaction.