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Cyprus finally set to join FDI arena – updated proposal for Cypriot FDI regime

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Home Perspectives Cyprus finally set to join FDI arena – updated proposal for Cypriot FDI regime

Key takeaways

  • Following in Greece’s footsteps and the EU’s Economic Security Strategy, the Cypriot government approved an updated legislative proposal to establish a Cypriot FDI screening regime, the last EU Member State to unveil such a proposal.
  • Cypriot FDI regime will require mandatory filings for foreign investments of at least €2 million in value which lead to acquisition of at least 25% stake in ‘strategic’ Cypriot entities, such as those active in the energy, transport, tourism, or health sectors.
  • Subsequent investments that lead to an increase in an existing stake to above 25%, or 50%, will also require a filing, regardless of the investment’s value, while non-notified deals will remain vulnerable to review for 15 months post-closing.
  • This proposal would align Cyprus’ investment rules with those of other EU Member States at a critical time, with the forthcoming liberalisation of its electricity market, and the contemplated liberalisation of its gas market opening significant investment opportunities in the Cypriot energy sector.
  • Once implemented, investments in strategic entities will require diligent preparation to avoid delays, proactively manage potential FDI concerns, and identify potential impact on transaction structure, as well as to ensure consistency with any other required filings under merger control rules, FDI rules in other jurisdictions, or the Foreign Subsidies Regulation.

Background

The European Commission (EC) and national EU governments have long acknowledged that foreign direct investments (FDI), while key to sustaining competitive economies, may pose risks to national security or public order. In response to such risks, most EU Member States have established national FDI screening regimes for investments in sensitive areas. Simultaneously, the EC has sought to harmonise and strengthen these efforts through the introduction of the EU Foreign Direct Investment Screening Regulation (EU FDI Screening Regulation), which created a cooperation mechanism between the EC and Member States for foreign investments affecting critical infrastructure and technologies within the EU.

Despite these developments, Cyprus has been more reluctant to introduce such screening rules, largely due to its longstanding strategy of positioning itself as an attractive, low-tax destination for foreign investments. As a result, and following Greece’s recent introduction of its own FDI screening Regime in May 2025, Cyprus remained one of only two EU Member States without an operational FDI screening regime (alongside Croatia). The evolving geopolitical environment1, coupled with sustained pressure from the EC, including through the EC’s recent proposal to revise and strengthen the EU FDI Screening Regulation by making FDI screening mandatory for all Member States, has compelled the Cypriot government to reconsider its position and recognise that the absence of FDI screening rules is no longer viable.

Consequently, on 3 July 2025, the Cypriot government finally put forward a revised bill On the Establishment of a Framework for the Screening of Foreign Direct Investments Law 2025 (Cypriot FDI Proposal). This proposal replaces an earlier draft proposed in March 2024 and is designed to bring Cyprus into alignment with the EU FDI Screening Regulation. The Cypriot FDI Proposal will establish a formal screening mechanism for investments originating from outside the European Economic Area (EEA) and Switzerland, requiring foreign investors to obtain approval from the Cypriot government prior to completing any investment that falls within the scope of its rules.