Cyprus is getting one step closer to the establishment of a national mechanism for the screening of Foreign Direct Investment (FDI). A bill was approved by the Council of Ministers on 2nd July 2025 and was sent to the Cyprus Parliament on 10th July 2025 for discussion and voting.
The FDI mechanism has been subject to deliberation and extensive discussions with stakeholders for over three years, in an attempt to set a protective framework for investment. The bill aims to be aligned with European Union standards, implementing the EU Regulation 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the European Union.
The FDI mechanism strives to upgrade Cyprus' credibility and international reputation, taking into consideration factors of national security and transparency, and safeguarding strategic infrastructure.
As per the bill, the Ministry of Finance will be the competent authority to screen foreign direct investments i.e. to assess, investigate, authorise, condition, prohibit or unwind FDI. A foreign investor (i.e. any individual or legal entity from outside the European Union, the European Economic Area, and Switzerland), intending to proceed with a foreign direct investment, should notify their intention, in writing, to the competent authority (i.e. the Ministry of Finance) at least ten days before the investment is made. The notification should include a description of the intended foreign direct investment. The Ministry of Finance will then approve, reverse or reject such an application for FDI transaction based on reasons of public order and national security.
Such obligation for notification applies when (a) the FDI results in the acquisition of special participation i.e. the acquisition, directly or indirectly, individually or in coordination with other persons, of a percentage amounting to at least 25% of the share capital and/or voting rights, or a corresponding ability to exercise decisive influence over the activities of the enterprise, and (b) the value of the FDI, either individually or in combination with other transactions between the same parties within a period of 12 months from the date on which the FDI is scheduled to take place, is equal to or exceeds €2 million, and (c) the FDI concerns a strategically important enterprise, which carries out activities falling within particularly sensitive sectors concerning vital infrastructure, whether physical or virtual, including infrastructure in the sectors of energy, transport, water supply, health, education, tourism, communications, media, data processing or storage, defence, electoral or financial services including systemic credit institutions, sensitive installations, as well as land and real estate of critical importance for the use of such infrastructure.
If there is any increase in the participation percentage from less than 25% to 25% or more, and from less than 50% to 50% or more, then the notification becomes mandatory irrespective of the value of the investment.
The obligation for notification applies in cases where the FDI is made through a legal entity in which a foreign investor has at least 25% of the share capital, irrespective of the country of origin of the enterprise, if the investment concerns a strategically important enterprise.
The competent Authority has the right to examine any FDI, beyond the cases of mandatory notification, if there are reasonable grounds to believe that the FDI may affect the security or public order of the Republic of Cyprus.
Exemptions from the mandatory notification apply to FDI which involve ships under construction or ships subject to sale or purchase, except for floating storage and regasification units (FSRU) of natural gas.
The bill provides for the timeline of the assessment and the evaluation criteria. Administrative fines are provided in case of violation or failure to comply with the provisions of the bill. The competent Authority's work will be supported by an Advisory Committee which will consist of seven members appointed by the competent Authority. The decisions of the competent Authority will be subject to appeal before the Administrative Court.
The bill is expected to be discussed upon and voted by the Cyprus Parliament following the summer recess.
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