Cyprus is a Common Law jurisdiction and generally follows the English legal system. The legal and regulatory frameworks in Cyprus are shaped by, among others:

• EU Law;
• constitution of the Republic of Cyprus;
• international treaties;
• Cyprus laws; and
• common law and equity principles.

Cyprus is an independent and sovereign Republic with a presidential regime based on the principles of legality, the division of authority (executive, legislature and judiciary), the impartiality of the judiciary and respect for and protection of human rights and fundamental freedoms.

Court System

Cyprus has two hierarchical multi-tier Court systems, as follows.

Civil and criminal cases

• District courts with jurisdiction to adjudicate, at a first instance, all civil law matters (except for specific civil matters that fall within the jurisdiction of specialised courts, please see below) and all criminal law cases which bear a sentence of imprisonment that does not exceed five years.
• Assize courts with jurisdiction to adjudicate all criminal law cases which bear a sentence of imprisonment that exceeds five years.
• Specialised courts with jurisdiction to adjudicate, at a first instance, specific civil matters which include the Family court, the Rent control court, the Labour Disputes court and the Military court.
• Court of Appeal with jurisdiction to adjudicate, at a second instance, of cases that fall within the jurisdiction of the District courts, Assize courts and Specialised courts.
• Supreme Court, which is the highest judicial authority for civil and criminal matters, with jurisdiction to adjudicate, at a third and final instance, among others, of cases that fall within the jurisdiction of the District courts, Assize courts and Specialised courts and to adjudicate at a first and second instance of all admiralty (maritime) cases.

Administrative cases

• Administrative court with jurisdiction to adjudicate, at first instance, all administrative law cases.
• Court of Appeal with jurisdiction to adjudicate, at a second instance, of administrative law cases.
• Supreme Constitutional court, which is the highest judicial authority for administrative and constitutional matters, with jurisdiction to adjudicate, at a third and final instance, among others, of administrative and constitutional law cases.

Business-Friendly Legal System

Cyprus has a business-friendly legal system offering transparency and strong investor protection. It is easy and cost-efficient to set up and operate a business, including joint ventures. There is flexibility regarding, among others:

• the return of capital and dividend distribution processes; and
• full compliance and harmonisation with EU legislation.

Being a common law jurisdiction that follows the English legal system allows investors setting up joint ventures in Cyprus to put in place Shareholders Agreements governed by English law, given the easy transmission of English law principles from the shareholders’ agreement to the Cyprus company’s articles of association.

The Cyprus legal system is also fully compliant with the Financial Action Task Force on Money Laundering (FATF), OECD, FATCA and EU AML directives, while regulators such as the Cyprus Bar Association, the Institute of Certified Public Accountants of Cyprus and the Cyprus Securities and Exchange Commission (CySEC) support businesses, thereby ensuring professional integrity, financial transparency, legal certainty, and compliance with EU standards, making Cyprus a trustworthy, internationally aligned, and competitive jurisdiction for business activity.

Cyprus has passed the Law on the Establishment of a Framework for the Control of Foreign Direct Investments (194(I)/2025) (Cyprus FDI Law) as the national mechanism for the monitoring and screening of FDIs, implementing the EU Regulation 2019/452 of the European Parliament, providing a key institutional reform upgrading international reputation.

The Cyprus FDI Law will come into effect on 2 April 2026.

In the context of the Cyprus FDI Law, a "foreign investor" is defined as a natural or legal person that is not a national of/registered in (as applicable) in the EU, EEA or Switzerland.

The competent authority overseeing and regulating FDIs is the Ministry of Finance in Cyprus. Pursuant to the Cyprus FDI Law, the competent authority determines if an FDI is subject to review and further scrutiny based on the indicative factors and criteria set out therein. If the competent authority declares that the FDI may affect the security or public order of the Republic of Cyprus, the FDI will be subject to greater scrutiny or control, or may even be terminated.

The move aims to strengthen the country’s protective framework, offering higher credibility, security and safeguarding strategic infrastructure, predominantly gravitating towards critical sectors or industries, including the fields of:

• energy;
• transportation;
• water supply;
• health;
• education;
• tourism;
• communications;
• media;
• data processing or storage;
• aerospace;
• defence;
• electoral services; or
• financial services (including systemic credit institutions).

It is noted that the competent authority has the power to decide that an FDI may affect national security or public order, even if it does not fall within one of the aforementioned economic sectors.

Cyprus presents a stable, investment-friendly environment with strong business advantages, providing a positive near-term outlook for inbound FDI. The political climate in Cyprus is generally stable, anchored by its EU membership and democratic institutions, while discussions are underway for Cyprus’s accession to Schengen in 2026.

Cyprus is experiencing steady economic growth above projections, driven primarily by sectors such as tourism, financial services, shipping, and real estate. The banking sector has undergone significant improvement, with bank assets relative to GDP approximating 194% of GDP, nearing the EU average. Unemployment rates are lower than in 2024 (4.7% in the first half of 2025, compared to 5.2% for the same period in 2024), while public debt has decreased well below the Maastricht Treaty limit.

As regards the business climate, the government maintains a competitive corporate tax rate (15%) and offers investment incentives which, coupled with the common-law legal system, foster a flexible, business-friendly environment. EU membership provides access to the single market, including structural funds, which underpin infrastructure and innovation projects.

In respect of the near-term outlook, the Cyprus government’s 2025-2028 agenda is heavily focused on areas such as digital transformation, green transition, research, innovation and entrepreneurship. Specifically, the promotion of technology, innovation, and digital services is fostering a growing fintech and startup ecosystem that is attractive to foreign investors.

In the energy sector, Cyprus continues its engagement in offshore natural gas exploration, which continues to attract foreign investment, while at the same time, there are ongoing green energy projects, opening opportunities for investment in renewables and related infrastructure.

The revival and diversification of tourism, historically the strongest economic sector in Cyprus, further support investments in hospitality and leisure, enhanced by improved connectivity and marketing efforts. At the same time, real estate and infrastructure demand remains robust, supported by EU Recovery Fund projects aimed at modernisation and development.

The enactment of the Cyprus FDI Law itself marks a decisive shift in Cypriot investment regulation, aligning the country with the prevailing EU approach of scrutinising foreign investments that may affect national security or public order. Cyprus is committed to maintaining its investor-friendly approach while, at the same time, implementing a mandatory, pre-closing screening mechanism for investments by foreign investors into defined sensitive sectors, requiring governmental approval before completion, where the transaction falls within scope.

Given that the Cyprus FDI Law was passed by the Cypriot Parliament on 30 October 2025 and will take effect on 2 April 2026, there are no high-profile enforcement cases to report at this stage.

Mergers and Acquisitions in Cyprus share many features with other EU jurisdictions, reflecting European legal and market standards.

The share purchase is one of the primary structures for the acquisition of companies. Buyers acquire the shares and thereby become owners of the company as a whole, including all assets, contracts, and liabilities. This approach, subject to any change of control or other restrictions, preserves commercial continuity, keeps employees and licenses in place and avoids the complexity of transferring assets individually.

Another common structure is the acquisition of an entire business or asset. Such acquisitions are often used when buyers want to purchase specific assets or businesses and ring-fence liabilities. An asset or business deal requires careful scoping and transfer mechanics for contracts, intellectual property, real estate, employees, permits and licences, each of which may need novation or consent. This additional complexity can lengthen timelines; however, it can provide a cleaner risk profile for the buyer.

Acquiring an unlisted public company typically resembles a process similar to private company transactions, though important differences remain. Public companies, even when not listed, are subject to distinct laws and rules, particularly regarding:

• financial assistance;
• share issuance; and
• governance formalities.

Additionally, domestic mergers of both private and public companies can be used as well-suited to complex restructurings, group simplifications, and acquisitions where a definitive, court-approved outcome is preferred.

In contrast, where the target is a listed public company, the acquisition is typically through a public offer regulated by the Takeover Bids Law 41(I)/2007, which governs public takeover bids for the acquisition of company securities and related issues, and the various regulations enacted by the Cyprus Stock Exchange (CSE). The transaction framework is set by key constraints, such as:

• equitable price rules;
• disclosure requirements;
• financing certainty for cash bids;
• restrictions on special arrangements; and
• ownership thresholds.

Minority investments (investments in companies that leave investors with less than a controlling interest) are usually structured as a transfer of shares. Such transactions commonly focus on:

• negotiated governance;
• information rights;
• anti-dilution protections; and
• exit provisions.

Further, prospective investors in Cyprus should assess whether merger control by the Cyprus Commission for the Protection of Competition is triggered, obtain any sector-specific approvals required in regulated industries such as banking and investment services and consider applicable FDI regulatory regimes.

Please refer to 6. Antitrust/Competition for an overview of the Cyprus merger control regimes, which also apply to domestic M&As and to 8. Other Review/Approvals for a summary of additional applicable regulatory frameworks.

Cyprus corporate governance rules predominantly stem from the provisions of the Cyprus Companies Law, Chapter 113 (as amended) (Chapter 113) and other specific legislation that relates to listed and/or regulated entities, such as the Transparency Requirements (Securities Admitted to Trading on a Regulated Market) Law.

Key corporate governance elements include some of those outlined below.

• Every company must appoint at least one director, while public companies must appoint at least two. Directors have an obligation to act honestly and diligently, comply with applicable laws, and uphold their fiduciary duties.
• Shareholder powers and protections stemming from Chapter 113 and the companies’ constitutional documents. These typically include voting rights, the ability to approve significant corporate actions, and access to essential company information.
• Public companies are subject to enhanced governance obligations under the rules of the CSE and CySEC, covering areas such as transparency, disclosure practices, financial reporting standards, and internal control systems.
• Preparation of financial statements in line with IFRS.
• Requirement for the financial statements to undergo an annual statutory audit.

The primary types of domestic corporate structures available in Cyprus are as follows.

Private Company Limited by Shares (Ltd)

This is the most frequently used corporate form in Cyprus. It is an independent legal entity (with separate legal personality) and shareholder liability is restricted to any unpaid amount on their subscribed shares. An Ltd requires at least one shareholder and may have up to 50. Its shares cannot be publicly offered. It must appoint at least one director and one secretary. Incorporation is straightforward and can generally be completed within roughly one to two working weeks.

Public Company Limited by Shares (Plc)

A Plc may offer its shares to the public and may also be listed on a stock exchange. Like an Ltd, it has a separate legal personality and shareholder liability is limited to any unpaid portion of their shares. A minimum of seven members is required, with no cap on the maximum number. At least two directors and a secretary must be appointed. Compared to an Ltd, a Plc is subject to more demanding regulatory standards and greater disclosure obligations.

Private Company Limited by Guarantee (CLG)

A CLG does not issue share capital; instead, it has members rather than shareholders. It has a separate legal personality, legally distinct from its members, whose liability is limited to the amount they agree to contribute should the company be wound up. While it can operate similarly to an Ltd, it is commonly used for succession planning, asset protection strategies (often as an alternative to a trust), or charitable activities.

All three company types are used by both local and international investors. A Ltd or Plc is typically selected for business operations – most commonly a Ltd, as most enterprises are privately owned. The CLG is also adopted by both domestic and foreign investors, particularly as an alternative estate-planning and asset-protection structure.

The selection of the type of legal entity to conduct business in Cyprus may depend on a number of factors, including the intended use (eg, holding/operations), the intended number of shareholders and any potential public listing and, accordingly, the considerations will vary. For instance, the use of an Ltd is faster and entails fewer disclosure requirements, whereas the use of a Plc may be suitable for large-scale operations or capital raising but is subject to stricter governance, transparency and reporting obligations.

Overseas Companies

Foreign companies may also operate directly in Cyprus by establishing a place of business in the country. In such cases, the foreign entity must notify the Cyprus Registrar of Companies within 30 days of setting up its local establishment and thereafter complying with certain initial and annual compliance obligations. Additionally, the company must appoint authorised representatives in Cyprus to handle management matters and communication with relevant authorities.

In Cyprus, the relationship between a company and its minority shareholders is primarily governed by Chapter 113 and further regulated by common law principles. This framework establishes shareholder rights, remedies, and protections, aiming to prevent the abuse of power by majority shareholders.

Unless otherwise regulated in a company’s constitutional documents, minority shareholders have, in principle, the same rights as any other shareholder, including voting rights, right to dividend and return of capital in a capital reduction process, return of surplus assets upon the winding-up of the company and access to information.

The Cyprus legal framework offers legal remedies in the event of oppressive and/or unfair conduct, including the following:

• right to bring a personal action;
• right to bring a derivative action (where the minority sues on behalf of the company for wrongs committed by those in control);
• right to seek to make a petition seeking, for instance, an order to regulate future operations or even to facilitate or order a buyout of shares; and
• right to make a petition for the winding-up of the company on the basis that it is “just and equitable” to do so.

In addition to the above, minority shareholders in public companies benefit from a number of protective measures, including the following:

• enhanced transparency due to public company disclosure and reporting obligations;
• ability to challenge management misconduct, including court orders against ultra vires or oppressive acts; and
• enhanced governance requirements imposed by regulators (such as the CSE and/or CySEC), which aim to strengthen oversight and mitigate abuse through mandatory disclosure and compliance obligations.

The Cyprus FDI imposes a number of disclosure and reporting obligations to persons falling within its scope, including the obligation to make a notification in writing to the competent authority before the implementation of the investment.

The notification must include, among others, details on ownership, source of funds, nature of business activities and value of the investment. Additional information on this matter is provided in 7. Foreign Investment/National Security.

Notwithstanding the above-mentioned notification requirement, additional obligations arise as regards the filing of information about ultimate beneficial owners and cash movement restrictions.

Cyprus has a small, EU-integrated capital market, operated by the CSE and supervised by CySEC.

The CSE provides two main trading environments:

• regulated market, which represents the principal trading venue for larger, more established issuers; and
• emerging companies market (ECM), which operates as a multilateral trading facility (MTF) designed for smaller and emerging companies, with simplified regulatory requirements to facilitate access to capital markets.

In Cyprus, business financing is largely bank-driven, reflecting the SME-based economy and the modest size and liquidity of local capital markets. Banks are typically the main source of working capital, term loans and trade finance, generally on a collateral-backed basis.

Access to capital markets is available but is relatively limited in depth and secondary liquidity, as outlined below.

• Equity: A relatively small number of local issuers list on the CSE’s regulated market, with some growth companies opting for the ECM due to lighter requirements. For scale and liquidity, Cyprus-related groups often raise equity or list abroad, using Cyprus mainly as a holding jurisdiction.
• Debt: Corporate bonds are issued and listed on the CSE Bond Market and ECM, often as private placements that are later admitted to trading. Larger Cypriot or Cyprus-linked issuers usually tap international bond markets and list on bigger EU exchanges.
• Private placements: Prospectus Regulation exemptions are widely used for targeted offerings to professional and other qualified investors.

Beyond banks and the stock market, Cyprus companies often rely on shareholder loans, private debt, and club deals with family offices and high-net-worth investors. Private equity and venture capital are emerging from a small base, mainly in tech, shipping-related and professional services.

Cyprus also offers government- and EU-backed grants, loans and financial instruments (including guarantee and co-lending schemes) aimed at SMEs, innovation, green transition and digitalisation. The investment funds sector (UCITS and AIFs) is growing and can provide an additional channel for growth capital.

Cyprus has developed a comprehensive securities regulatory framework that reflects its EU membership and commitment to harmonised European financial market standards. CySEC serves as the primary regulatory authority, overseeing the implementation and enforcement of these securities laws.

The key legal framework for securities and regulation over capital markets in Cyprus has been outlined below.

• The Securities & Stock Exchange Laws govern the issuance, listing, trading, and ongoing supervision of various financial instruments, including equity securities (shares), debt instruments (bonds), derivatives and collective investment schemes. The legislation sets out requirements for issuers seeking to access public markets, including disclosure obligations, corporate governance standards, and ongoing reporting requirements.
• The Takeover Bids Law transposing the EU Takeover Bids Directive (2004/25/EC) and regulating the conduct of public offers to acquire control of companies whose securities are admitted to trading on a regulated market. Key provisions include mandatory bid thresholds (typically triggered when an acquirer crosses a specified ownership percentage), equal treatment of shareholders, information disclosure requirements for bidders and target companies, and procedural rules governing the timing and conduct of offers. The law also addresses defensive measures that target boards may employ and establishes squeeze-out and sell-out rights for majority and minority shareholders, respectively.
• The Public Offer and Prospectus Laws and the EU Prospectus Regulation provide that any offer of securities to the public or admission to trading on a regulated market be accompanied by a prospectus approved by CySEC (or, where applicable, by a competent authority in another EU Member State under the passporting regime). Notably, under this legislation, various exemptions from the prospectus requirement are provided.
• The Market Abuse Law transposes the EU Market Abuse Regulation (MAR) (Regulation (EU) No 596/2014) into Cypriot law. This law imposes obligations on issuers to publicly disclose inside information as soon as possible and to maintain insider lists. It also establishes reporting requirements for persons discharging managerial responsibilities and their closely associated persons regarding transactions in the issuer’s securities.
• The Transparency Requirements (Securities Admitted to Trading on a Regulated Market) Law implementing the EU Transparency Directive (2004/109/EC, as amended by Directive 2013/50/EU), which establishes a comprehensive disclosure regime for issuers whose securities are admitted to trading on a regulated market, with the objective of ensuring that investors have access to complete and timely information.
• The Investment Services and Activities and Regulated Markets Law transposing the Markets in Financial Instruments Directive II (MiFID II) (Directive 2014/65/EU) and, together with the directly applicable MiFIR (Regulation (EU) No 600/2014), forms the cornerstone of Cyprus’s regulatory framework for investment firms and trading venues. This law, among other things, regulates the operation of regulated markets, multilateral trading facilities (MTFs), and organised trading facilities (OTFs), including requirements for transparent, non-discriminatory access, pre- and post-trade transparency and controls on algorithmic and high-frequency trading.

The key requirements for the regulated market in Cyprus include, inter alia:

• incorporation in accordance with Cyprus law or the law of the issuer’s country of incorporation;
• a CySEC-approved prospectus;
• audited financial accounts for the three years preceding the application;
• capital adequacy requirements as determined by the CSE laws; and
• compliance with the CSE Corporate Governance Code.

Ongoing obligations include the publication of annual and half-yearly financial reports, prepared in accordance with applicable accounting standards (typically IFRS for consolidated accounts). The legislation also mandates ongoing disclosure of major shareholdings, requiring investors to notify issuers and CySEC when their voting rights cross specified thresholds (typically 5%, 10%, 15%, 20%, 25%, 30%, 50%, and 75%). Issuers must disseminate regulated information through mechanisms that ensure effective and timely access across the EU.

The ECM operates as an MTF (rather than a regulated market) and is accordingly subject to less stringent admission and ongoing requirements.

A foreign investor engaging in FDI (eg, acquiring shares in a Cyprus operating company) is not subject to special securities law obligations purely because the investor is foreign or the investment is “FDI”. Securities law obligations arise if:

• the investment is in listed securities (disclosure, takeover, market abuse rules);
• the investor acquires qualifying stakes in regulated entities; or
• the investor conducts regulated investment services or activities in Cyprus.

The Cyprus FDI Law will apply equally to all foreign investors, including those structured as investment funds, whenever applicable thresholds and sector-specific criteria are met and there is no exemption for investment funds as a separate asset class; instead, the focus is on the investor’s origin, the size of the stake, the value of the transaction, and the sector involved.

Cyprus has a merger control regime, governed by the Control of Concentrations between Undertakings Law of 2014 (L.71(I)/2014) (Control Law). The Commission for the Protection of Competition (CPC) is the regulatory authority responsible for enforcing competition law in Cyprus.

The types of FDI that trigger a notification are mergers, acquisitions and/or joint ventures that are considered “of major importance”.

The requirements for an FDI to be considered “of major importance” are as follows:

• the consolidated turnover of at least two of the participating enterprises exceeds, in respect of each of them, EUR3,500,000 euros;
• at least two of the participating enterprises have a turnover within the Republic; and
• at least EUR3,500,000 euros of the total turnover of all the participating enterprises is generated within the Republic, or it is declared as such by Order of the Minister of Energy, Commerce, Industry and Tourism for reasons of public security, diversity of media and the right to good administration.

Foreign-to-foreign transactions are caught if the thresholds are met, despite having no presence in Cyprus or any actual connection to Cyprus other than generating turnover that meets the above thresholds.

If these thresholds are met, the notifying parties must submit a notification to the CPC for approval before implementing the concentration. The notification must be submitted using the prescribed form with supporting documents as specified by the Law and the CPC.

The Control Law does not apply if the concentration falls within the EU jurisdiction under EC Regulation 139/2004 (the EU Merger Regulation).

Phase I: During this period, the Commissioner assesses whether the concentration raises competition concerns. This takes up to one month from the receipt of a complete notification (and may be extended by 14 days for complex cases). If no concerns arise, the concentration is cleared unconditionally at the end of this phase.

Phase II: If the Commissioner finds potential competition concerns, they are examined in this phase, which may take up to an additional 3 months. At the end of this phase, the Commissioner either issues a clearance or a prohibition of the concentration.

Failing to notify or implementing without clearance is an infringement subject to penalties under the Law. Penalties include fines of up to 10% of the CTO of the parties in Cyprus, plus an additional fine of up to EUR8,000 for each day the infringement continues.

The main objective of the merger control review is to assess whether the proposed concentration would impede effective competition within the relevant market or markets in Cyprus, notably by creating or strengthening a dominant position.

The criteria, considerations and analysis involved include:

• defining the products/service market;
• defining the geographic market;
• assessing the market structure and market shares (combined market shares, concentration levels, etc);
• nature of the concentration and effects (vertical, horizontal and conglomerate effects);
• barriers to entry; and
• countervailing factors.

The CPC may require remedies or commitments as a condition for approving a concentration that raises competition concerns or prohibit the concentration.

The CPC can require structural remedies (such as divestitures or the sale of parts of the business) or behavioural remedies (such as ongoing supply obligations, access to technology, or firewall provisions). Parties may propose adjustments to avoid a complete prohibition, with remedies strictly confined to what is essential to preserving fair competition.

The CPC can review mergers or acquisitions, including those involving foreign investors, and either block or conditionally approve them before the investment is completed.

The CPC may also assess businesses’ competitive practices, regardless of a merger filing.

The interested parties may apply in writing requesting to be heard before a decision of the CPC is issued.

The decisions of the CPC are subject to judicial administrative review.

If parties implement a concentration without notifying or receiving clearance when required, the following may occur:

• the transaction may be declared null; and
• the Commissioner may impose fines for non-compliance.

The national framework for monitoring and screening FDI in Cyprus is the Cyprus FDI Law. The Ministry of Finance has been designated as the competent authority to monitor and control the FDI in Cyprus.

The competent authority has the responsibility to screen and identify whether the given FDI should be prohibited, reversed or subject to conditions, given that certain FDIs identified under the Cyprus FDI Law may be deemed to pose a potential risk to Cyprus’s national security or public order.

Conditions

The obligation to notify the Ministry of Finance of an intended FDI arises when the following conditions are cumulatively met:

• the FDI equals or exceeds EUR2,000,000, individually or cumulatively within a 12-month period;
• the foreign investor will acquire ownership or control of the target undertaking by:
• acquiring 25% or more of the share capital or voting rights of the undertaking;
• increasing its existing shareholding or voting rights to 25% or more;
• otherwise acquiring the capacity to exert decisive influence over the activities of the target undertaking.

The target undertaking operates in a sector deemed sensitive or critical for national security and public order. These sectors include (without limitation):

• infrastructure of vital importance, both physical and virtual, especially in the areas of energy, transportation, water, health, education, tourism, communications, media, data processing or storage, aerospace, defense, electoral or financial services, including systemic credit institutions, and sensitive establishments;
• land and real estate significant for the use of such infrastructure;
• access to sensitive information, including personal data, or the ability to control such information. technologies critical to operations and dual-use items, such as AI, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies, nanotechnologies and biotechnologies;
• supply with critical production factors, including energy or raw materials and food security.

The Cyprus FDI Law expressly exempts from notification transactions relating solely to ships under construction or sale, excluding Floating Storage and Regasification Units (FSRUs).

Basis of Screening and Notification Requirements

The basis for screening includes the control intended to be exercised by foreign investors over sensitive sectors, as well as any involvement in activities that might compromise the security or public order of Cyprus or other EU member states. The competent authority may also consider the ownership structure of the foreign investor, the investor’s track record in other jurisdictions, and compliance with other laws and regulations.

The notification should include comprehensive information about the investment, such as the parties involved, the nature of the investment, its value and the relevant activities of both the investor and the target undertaking.

The competent authority must evaluate the information provided to it in relation to the FDI within 20 working days from the date on which the filing is deemed complete. The Ministry of Finance notifies the foreign investor within five days of the date of its decision whether the FDI has been cleared and may proceed, or whether it must undergo screening.

If the competent authority decides the latter, then it must decide within 65 working days from the date of its decision whether the FDI affects national security and public order and may impose conditions on the FDI or prohibit and reverse the FDI altogether. These timelines are paused when the Ministry of Finance requests further information (until the requested information is duly provided).

If the competent authority determines that the controlled FDI affects the security or public order of the Republic of Cyprus, it may, as appropriate, impose conditions, prohibit or reverse the controlled FDI and notify the foreign investor of its decision.

Notification to the competent authority must take place prior to the implementation of the FDI. There is no requirement for a decision to be issued by the competent authority prior to the implementation of the FDI, but given that the competent authority has the power to prohibit and reverse the FDI, there is a general trend for sale and purchase agreements to include a condition for FDI clearance to be obtained prior to completion.

In deciding whether the FDI might be detrimental or pose a substantial risk to national security or public order, the criteria to consider include the following:

• whether the sector in which the FDI will take place is sensitive, including the fields of energy, transport, health, education, tourism, communication, media, data processing or storage, defence, electoral or financial services, land and assets, inter alia;
• whether the foreign investor is checked directly or indirectly by a third country government;
• if the foreign investor has been involved in activities which affect the safety or public order of an EU Member State; and
• the degree to which the FDI affects or might affect the security or public order of a Member State other than the Republic of Cyprus or the EU as a whole.

There are no express criteria, considerations or analyses that differentiate partnerships and joint ventures, or acquisitions by foreign governments or government-affiliated entities, from the rest of the FDIs.

As regards non-controlling minority investments, they are not within the scope of the Cyprus FDI Law and therefore do not require notification to the competent authority in Cyprus.

Based on the Cyprus FDI Law, if a foreign investor does not comply with the provisions of the FDI law (including failure to notify an FDI, providing false information, not providing information which has been requested and non-compliance with conditions imposed by the Ministry of Finance), the competent authority has the power to impose administrative fines.

The administrative sanctions imposed on a foreign investor are accompanied by a duly reasoned decision by the competent authority, specifying the violation or failure to comply, and are communicated in writing to the affected person. These sanctions should be imposed after the affected party has been given the opportunity to be heard.

The fines which may be imposed vary depending on the violation, namely:

• a fine between EUR5,000 and EUR50,000 may be imposed on a foreign investor, in the case of failure to notify a foreign transaction;
• an administrative fine of a maximum EUR100,000 may be imposed in the case of providing false or misleading information to the competent authority;
• an administrative fine of a maximum EUR50,000 may be imposed in the case of failure to provide requested information; and
• an administrative fine of up to EUR100,000 may be imposed for failure to comply within the period specified by the competent authority and an additional administrative fine of up to EUR8,000 for each day the violation continues.

Provided that the imposition of any administrative sanction shall not affect any other rights and/or powers of the competent authority under the provisions of this Cyprus FDI Law.

Where an FDI has been notified, the competent authority notifies the foreign investor within five days of the date of its decision whether the FDI is cleared and may proceed, or must undergo screening.

If the competent authority decides the latter, then it must decide within 65 working days from the date of its decision whether the FDI affects national security and public order and may impose conditions on the FDI or prohibit and reverse the FDI altogether.

The competent authority reserves the right to examine any FDI, regardless of whether it falls within the mandatory notification framework, in cases where there are reasonable grounds to believe that the FDI may affect the security or public order of Cyprus.

In cases where the FDI is not subject to mandatory notification, the competent authority may exercise this power within 15 months from the date the investment was made. In cases where the FDI is subject to mandatory notification and was not notified, the competent authority may exercise this power within five years from the date on which the investment was made.

Investors can appeal decisions from the competent authority through the Administrative Court by filing a recourse action within 75 days from the date of the decision of the Ministry of Finance. The Administrative Court does not examine the merits of a case but merely whether the correct administrative procedures were followed when an enforceable administrative act was taken (such as whether the composition of the decision-making body was appropriate under Cyprus law when the decision being appealed was made).

The Cyprus FDI Law designates several economic sectors as “sensitive”. Outlined below are some of these sectors that are also subject to further restrictions and/or regulations under separate legal frameworks applicable in Cyprus.

Real Estate

Third-country investors interested in acquiring real estate in Cyprus must, in principle, obtain permission from the Cyprus Council of Ministers.

Financial Services

Cyprus is subject to EU legal instruments imposing regulatory obligations on Member States to regulate certain entities, such as the Markets in Financial Instruments Regulation (EU) No 600/2014 (MiFIR) and the Markets in Crypto-Assets Regulation (EU) 2023/1114 (MiCAR). Cyprus has also transposed a number of directives into national law, creating certain regulatory obligations, including (inter alia):

• the Markets in Financial Instruments Directive 2014/65/EU (MiFID II);
• Undertakings for Collective Investment in Transferable Securities Directive 2009/65/EC (UCITS);
• Alternative Investment Fund Managers Directive 2011/61/EU (AIFMD); and
• Anti-Money Laundering Directives (EU) 2015/849 and (EU) 2018/843 (AML).

The Role of the Central Banks Of Cyprus

At the same time, the Central Bank of Cyprus is responsible for the supervision of banks, credit servicers, payment institutions, electronic money institutions, bureaux de change businesses, financial leasing companies and mortgage credit institutions. It exercises its supervisory authority in accordance with the provisions of several laws, including the Business of Credit Institutions Law.

EU Restrictions and Sanctions in Cyprus

Separately to the above, Cyprus, as a member of the European Union, has a clear legal obligation to observe, implement and enforce all applicable EU restrictive measures and sanctions and, in this context, Cyprus has a responsibility to, among others, prevent, detect and penalise conduct that circumvents applicable sanctions.

Corporate Income Tax (CIT)

A flat CIT rate of 15% applies to taxable profits.

A company is considered resident if (a) its management and control are exercised in Cyprus or (b) it has been incorporated under the Cyprus Companies Law (or subsequently transferred its registered office or legal seat to Cyprus), except for companies deemed as tax residents of another country by reference to an applicable double tax treaty.

Resident companies are taxed on their worldwide income. A company that is non-resident in Cyprus is taxed only on its income derived from a permanent establishment (PE) in Cyprus and/or on certain other income arising from sources in Cyprus.

Value Added Tax (VAT)

The standard rate is 19%. It applies to the supply of goods and services in Cyprus and the importation of goods into Cyprus. Businesses are required to register and charge VAT if their taxable turnover exceeds certain thresholds.

Social Insurance and Payroll Taxes

Employers must contribute to the Social Insurance Fund, the National Health System (GESY), and other funds for their employees.

Differences Based on Organisation Type

Corporations (limited companies)

These are considered separate legal entities and are subject to CIT, in limited cases, special contribution for the defence and VAT.

Partnerships

Generally treated as tax-transparent entities in Cyprus. The partnership itself is not subject to CIT; instead, its profits are attributed to its partners, who then pay tax on their share of income (either CIT for corporate partners or personal income tax for individual partners) in Cyprus, depending on whether they are tax residents in Cyprus or have income in Cyprus.

Dividends

Generally, 0% withholding taxes (WHT) on dividends paid by a Cypriot company to non-resident shareholders. WHT on certain dividends paid to low-tax jurisdictions is 5% and on dividends paid to blacklisted jurisdictions, it is 17%.

Interest

Generally, 0% WHT on interest paid by a Cypriot company to non-residents. WHT on certain interest payments to blacklisted jurisdictions.

Treaty Shopping Limitations

The availability of treaty benefits is subject to limitations to combat treaty shopping. These aim to ensure only genuine residents benefit from:

• beneficial ownership – the non-resident recipient must genuinely own the income, not just be a conduit;
• principal purpose test – treaty benefits will be denied if obtaining that benefit was a principal purpose of the arrangement; and
• limitation on benefits – some treaties have specific, objective tests a company must pass to qualify for treaty benefits.

If these limitations are triggered, the intended treaty benefits (eg, lower WHT from another country) can be denied.

Acquisition Structures

One of the factors to be considered in the transaction structure is the tax basis of depreciable assets, depending on how the transaction will be structured.

“Earnings Stripping” with Intercompany Debt

Cyprus has transfer pricing regulations that must be observed before agreeing on intercompany debt.

Cross-Licensing or Similar Arrangements (IP Box)

Cyprus has an attractive IP Box regime. Centralising qualifying intellectual property (IP) in Cyprus allows for up to 80% of qualifying IP profits to be tax-exempt.

Net Operating Losses

NOLs incurred by a Cyprus company can be carried forward for up to seven years to offset future taxable profits, providing significant tax relief in profitable periods.

Group Relief

Losses from one Cyprus-resident company can be surrendered to another profitable Cyprus-resident company within the same group in the same tax year, effectively consolidating taxable income at a group level.

Generally, the transfer of ‘securities’ is not subject to income tax or Capital Gains Tax (CGT) in Cyprus. Securities are broadly defined to include shares, bonds, debentures, founders’ shares, and other titles of companies or other legal persons, whether Cypriot or foreign, as well as options thereon.

Exceptions to CGT Relief for FDI

The primary and most significant exception to this capital gains exemption relates to the disposal of immovable property located in Cyprus. This includes:

• direct disposal of immovable property in Cyprus – Gains arising from the sale of land and buildings situated in Cyprus are subject to Cyprus CGT at a rate of 20%.
• disposal of shares in a company whose assets consist mainly of immovable property in Cyprus -  CGT also applies to the disposal of shares in companies (whether Cypriot or foreign) that directly own immovable property in Cyprus, or indirectly own immovable property in Cyprus, where more than 20% of the market value of the said shares derives from immovable property located in Cyprus.

Tax Benefits of a Cyprus Tax Resident Company

Foreign investors investing in Cyprus through a Cyprus tax resident company can benefit from several tax advantages:

• exemption from capital gains tax on the disposal of shares/securities (as detailed above);
• no WHT on dividend payments made by the Cyprus company to non-resident shareholders (apart from certain dividend payments to low tax or blacklisted jurisdictions);
• no tax on dividend income received by the Cyprus company (subject to certain conditions);
• deemed deduction of up to 80% under Notional Interest Deduction and/or IP Box regime; and
• extensive network of Double Tax Treaties.

Transfer Pricing Rules

Cyprus adheres to the arm’s-length principle, requiring that transactions between related parties (including a foreign investor and its Cyprus company) be conducted as if between independent parties. This includes mandatory transfer pricing documentation requirements for transactions exceeding certain thresholds.

GAAR

Cyprus’s General Anti-Abuse Rule (GAAR) empowers tax authorities to disregard arrangements that lack genuine commercial substance and are primarily intended to secure a tax advantage that subverts the objective of tax law. This rule applies to all income tax-generating transactions, impacting both companies and individuals, thereby strengthening Cyprus’s stance against abusive tax practices.

Overview of Employment Law Landscape in Cyprus

There is no single, unified employment legislation in Cyprus. The legal framework comprises common law principles, case law, statutes and EU Directives transposed into local law, each covering a specific area of employment law, as follows:

• primary legislation covers essential areas such as working conditions, working time, minimum wage, wage protection, termination of employment, maternity and paternity protection, etc; and
• secondary legislation includes Regulations, Decrees and Orders issued under the authority of the main statutes.

Additionally, sector-specific laws apply to industries such as retail, hospitality, catering, and domestic work.

Over the past few years, Cyprus has introduced significant reforms aimed at enhancing transparency and predictability for both employers and employees. Key developments include:

• strengthened provisions on working conditions;
• enhanced measures to prevent harassment and workplace violence; and
• introduction of remote work arrangements and flexible working conditions.

Employment-related matters fall under the remit of the Ministry of Labour and Social Insurance and the Department of Labour Relations. The Industrial Disputes Tribunal has exclusive jurisdiction over disputes relating to termination of employment and other employment-related claims.

Collective Bargaining/Trade Unions

Trade unions are the driving force of collective bargaining in Cyprus and are prevalent in the public and semi-public sectors and in specific private-sector industries such as hospitality, shipping, banking, and pharmaceuticals. Trade unions enter into collective agreements with the said organisations and are generally regulated by the Industrial Relations Code. Where a collective agreement exists, Cypriot law requires employers to engage in dialogue with trade unions on any changes affecting employment terms before implementation. Collective agreements are relatively uncommon in the private sector, which is predominantly regulated by individual employment contracts. Consequently, investors engaging with businesses in Cyprus are more likely to encounter private employment agreements rather than collective bargaining arrangements or trade union involvement.

Key consideration for investors in relation to collective bargaining

Collective bargaining promotes structured employee relations, providing investors with a predictable labour environment. The presence of organised employee representation often leads to smoother integrations during acquisitions and fosters long-term workforce stability, both of which are advantages for investors seeking sustainable operations. Whilst negotiations may be time-consuming and involve specific demands that require additional assessments, such factors can be planned for and understood with the right legal advice and structuring.

Compensation Framework in Cyprus

Recent legislative changes have introduced specific requirements on wage payment methods and safeguards from unlawful deductions. Employers must ensure that salary payments are made exclusively through one of the following:

• deposit into the employee’s bank account;
• payment into an account designated by the employee, or
• a cheque issued in the employee’s name.
• Cash payments are only permittedin  exceptional circumstances.

Additionally, in 2022, Cyprus introduced a statutory minimum wage applicable to all employees. Effective 1 January 2026, the minimum monthly salary for full-time employment is EUR1,088, subject to sector-specific variations. Mandatory deductions include Social Insurance and contributions to the General Healthcare System (GESY/GHS). Employers may also provide additional discretionary benefits such as private health or life insurance, provident funds or pension schemes, which depend on company policy and contractual arrangements.

While a “13th salary” or year-end bonus is common practice in many sectors, it is not a legal requirement. Where consistently paid, the 13th salary is generally treated as deferred remuneration and becomes a contractual entitlement.

Employee Compensation in Transactions

Share sale

In a share sale, only the ownership of the company changes. The employer-employee relationship remains intact, and therefore, compensation terms and benefits are unaffected.

Asset/business sale

Where a business, undertaking, or part thereof is transferred from one employer to another through a legal transfer or merger, the provisions of the Safeguarding and Protection of Employees’ Rights in the Event of the Transfer of Undertakings Law (Law 104(I)/2000) apply. Under this law, the transferee (new employer) must maintain the existing terms and conditions of employment, including those set out in any collective agreement, subject to limited exceptions; accordingly, employee compensation remains unchanged.

Both the transferor and the transferee are required to follow the prescribed notification and consultation process. Foreign buyers involved in an asset or business sale must ensure compliance with the specific procedures set out in the law.

In addition to the rights outlined in paragraph 10.2 Employee Compensation, both the transferor (original employer) and transferee (acquiring employer) are obliged to ensure the continuity of employment, including preservation of length of service and maintenance of social insurance and tax contributions. The applicable legislation provides that the transfer of a business or undertaking does not constitute a valid ground for termination of employment.

Prior to the transfer, employees must be informed in ‘good time’ of the proposed transfer date, the reasons for the transfer, and its legal, economic, and social implications, as well as any envisaged measures. The transferor is required to consult, in ‘good time’, with employees or their representatives regarding proposed measures with the objective of reaching an agreement. Where a collective agreement is in force, the transferee must continue to observe its terms and conditions until expiry or replacement by another agreement.

Intellectual property is one of the factors to be considered in screening FDI in Cyprus. The Cyprus FDI Law imposes an obligation to file an FDI in Cyprus when the FDI is likely to affect security or public order. In determining this, the competent authority may take into account the potential effect of the FDI on, among other things, critical technologies and dual–use items, including:

• AI;
• robotics;
• semiconductors;
• cybersecurity;
• aerospace;
• defence;
• energy storage;
• quantum and nuclear technologies; as well as
• nanotechnologies and biotechnologies.

Cyprus is generally considered to provide strong, EU-aligned intellectual property protection, backed by broad treaty participation (EPC, PCT, Madrid), and modernised national laws (Patents Law 16(I)/1998; Trade Marks Law Chaper 268; Copyright Law 59/1976 as amended; Industrial Designs Law Chapter 112; Geographical Indications Law 139 (I)/2006; Trade Secrets Law 164 (I)/2020).

The main IP rights in Cyprus are copyright, patents, designs, trademarks and trade secrets (unregistered).

Patent law excludes subject matters such as discoveries, scientific theories/mathematical methods, works of aesthetic creation, business schemes, rules and methods for carrying out intellectual activities, for games and for conducting economic activities, data reports and pure software. Compulsory licensing and government-use provisions exist for public interest, similar to EU norms.

Overall, Cyprus offers a stable, EU-aligned IP regime with standard limitations on excluded subject matter and AI authorship.

Cyprus enforces the EU General Data Protection Regulation (GDPR) alongside the Cypriot Law on the Protection of Natural Persons with regard to the Processing of Personal Data (Cyprus Law 125(I)/2018). Both have extraterritorial scope, applying to foreign entities that process the personal data of individuals in the EU, when the processing is carried out in the context of an EU-based establishment or involves offering goods, services, or monitoring the behaviour of individuals within the EU.

The Office of the Commissioner for Personal Data Protection is the supervisory authority in Cyprus responsible for enforcement, carrying out audits and investigations to ensure compliance. Notably, the Commissioner issued guidance requiring Cyprus-based companies to appoint a Data Protection Officer who resides in Cyprus. Cyprus Law 125(I)/2018 establishes criminal penalties for certain types of non-compliance and, alongside the GDPR, permits administrative penalties based on the severity of the infringement, reaching up to EUR20 million or 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher.

Foreign investors and businesses that target, monitor, or otherwise process personal data of individuals in Cyprus should implement robust data protection compliance programs to mitigate enforcement exposure.