Cyprus extends reduced VAT on household electricity to March 2027
- Cyprus has extended the 9% VAT rate on domestic electricity to 31 March 2027
- The measure, first introduced in 2021, now enters its sixth year at a cost of €40 million
Cyprus has confirmed a further extension of its reduced VAT rate on domestic electricity to 31 March 2027, acknowledging that wholesale and retail power prices remain materially higher than pre-inflation levels.
This continues a sequence of temporary VAT relief measures first introduced at the end of 2021 in response to the European energy price shock.
European VAT inflation cuts has been widespread since the end of 2021 when inflation began to rise.
The reduced regime had been due to expire on 31 March 2026. It will now run for an additional year at an estimated fiscal cost of €40 million.
How Cyprus’ electricity VAT cuts evolved
Cyprus was one of the earliest EU Member States to use VAT rate flexibility to cushion households from the post-COVID energy spike and subsequent gas-supply disruptions linked to the war in Ukraine.
|
Period |
Measure |
VAT rate |
Scope |
|---|---|---|---|
|
Nov 2021 – Apr 2022 |
Initial emergency cut |
9% (from 19%) |
Domestic electricity (Tariff Codes 08 & 56) |
|
Winter 2021/22 |
Peak hour relief |
9% |
Domestic peak tariffs (Codes 01, 02, 56) |
|
2022–2023 |
Extensions during fuel inflation |
9% and 5% |
Broader household support; vulnerable groups at 5% |
|
2024–Mar 2026 |
Ongoing rollover |
9% |
Domestic electricity |
|
Apr 2026–Mar 2027 |
New extension |
9% |
Domestic electricity unchanged |
Alongside this, Cyprus also temporarily reduced VAT on petrol and capped excise duties during the height of 2022 inflationary pressures
A familiar EU pattern: temporary becomes semi-permanent
Across the EU, energy VAT reductions introduced as anti-inflation tools have often lingered far beyond their intended life:
- Reduced VAT on gas/electricity in multiple Member States remains in place three years later
- Governments face political resistance to restoring standard rates while household bills remain elevated
- VAT, designed as a neutral consumption tax, is repeatedly repurposed as a price-control instrument
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EU VAT rate setting freedoms
In April 2022, EU agreed reduced VAT rate setting freedoms. This includes to cut rate below 5% for the first time on a limited range of supplies. This is due to by submitted for a non-binding vote in the EU Parliament of 2025 implementation. Although member states may introduce the legislation immediately.
