The Government of Cyprus has decided to extend the reduced value-added tax rate on electricity for household consumers until March 31, 2027. The corresponding decision was approved at a Cabinet meeting on Wednesday, February 4. It should be recalled that the previous amendment was set to expire on March 31, 2026, however the authorities considered it necessary to extend the measure for another 12 months.
Cyprus Minister of Finance Makis Keravnos explained after the meeting that the basis for this step was the lack of a decrease in electricity supply prices compared to the same period last year. According to him, the government aims to ease the pressure of high tariffs on family budgets and support household purchasing power.
How much it will cost the Cyprus budget
Extending the reduced VAT rate on electricity will cost the state approximately 40 million euros. This amount is included within the broader policy to combat rising energy prices and is part of a wider package of social and economic support measures. Authorities emphasize that reducing the tax burden helps partially offset high electricity bills, which remain one of the main expense categories for the population.
Energy policy context
The decision to extend the reduced VAT is being taken against the backdrop of ongoing instability in energy markets and delays in the implementation of major energy projects. Despite plans to increase the share of renewable sources and develop infrastructure, electricity costs for consumers have not yet shown a steady downward trend. In this context, tax relief remains one of the key tools to support households and preserve their real incomes.
It should be noted that payment for electricity is the most expensive expense category in Cyprus. This is especially noticeable in winter, when water heating and heating appliances must be used constantly. The average bill for a one-bedroom apartment during this period is about 100–150 euros per month. It is slightly cheaper in summer. The price may fluctuate slightly each month. Since imported fuel oil is used to power electricity generation in Cyprus, prices directly depend on global oil market costs. Accordingly, when oil becomes more expensive, electricity prices on the island also rise, and vice versa.