Cyprus Introduces Foreign Investment Screening Mechanism

In Cyprus, all foreign investments worth €2 million and above will be subject to mandatory screening under the new direct investment screening mechanism. The Finance Committee of the Cypriot Parliament has completed consideration of the draft law introducing the relevant mechanism. It is expected that the bill will be submitted to the plenary session of the Parliament within three weeks.

The purpose of the draft law is to implement the European regulation on the screening of foreign direct investments. It defines:

• the conditions under which the obligation to notify the intention to make a foreign direct investment arises;

• the criteria and factors that will be taken into account when screening such investments;

• the procedure for monitoring and the requirements for the amount of information to be provided during the screening procedure.

The competent authority for the implementation of the new mechanism is the Ministry of Finance of Cyprus, which will supervise compliance with the legislative requirements.

According to the bill, the verification of foreign direct investments can be carried out retrospectively, for a period of up to 15 months. In case of detection of dubious origin of capital or non-compliance with security requirements, the investment may be canceled.

The draft law provides for the possibility of verifying investments in such sectors as:

• banking,

• defense;

• energy;

• healthcare,

• real estate,

• tourism,

and other areas of strategic importance for the country’s economy.

A similar practice has already been in effect in the EU for the past five years, and Cyprus is harmonizing its norms with European regulations and its latest innovations.

The adoption of the draft law will allow Cyprus to exchange information on investments with other EU countries.