The President of Cyprus has signed a decree reducing VAT on electricity from 19% to 9%.
He made the announcement personally in a televised speech, as part of a summary of his achievements during his second year in office.
The decree will come into force on 1 April and will be valid for one year. It will provide significant incentives to the island nation's residents.
As part of the drive to make energy cheaper and reduce the tax burden, I am announcing a reduction in VAT. For households, this means that the electricity tax will be reduced from 19% to 9%. In parallel, we have launched targeted measures for the exploitation of natural gas in our country's EEZ, signing two important agreements for the commercial exploitation of natural gas in Egypt, while drilling is already underway, the results of which are expected in the coming days,' said Nikos Christodoulidis.
It is worth noting that AKEL leader Stefanos Stefanou had earlier launched an initiative to reduce VAT on electricity from 19% to 9% and called on the government to abandon the so-called green taxes, which he said could lead to further increases in electricity, fuel and waste disposal prices. His comments followed a meeting with the management of the Electricity Authority of Cyprus (EAC), where the issues of rising tariffs and financial pressure on citizens were discussed.
Stefanou stressed that the European Commission has already allowed for the possibility of reducing VAT on electricity and that Cyprus is well placed to benefit from this measure. In his view, the government should immediately initiate a process to reduce the tax burden on households and businesses. He also criticised the introduction of green taxes by the previous government, saying that these measures were taken without a binding decision from the EU. According to the politician, the abolition of these taxes could significantly slow down the growth of electricity prices, which is particularly important in times of economic instability.
In addition to fiscal policy, the AKEL leader highlighted the problem of the delay in the Vasilikos natural gas project. He explained that the initial implementation of the project was accompanied by systemic errors, which led to the delay and increased costs. Stefanou stressed that if the project had been launched on time, Cyprus would already have been able to use natural gas to generate electricity, which would have helped to significantly reduce its cost.
It should be recalled that the Cypriot government has already temporarily reduced VAT on electricity on several occasions in order to ease the financial burden on the population.
In the periods November-December 2021, January-February 2023 and March-April 2023, the VAT rate was reduced to 9% for all households and to 5% for socially vulnerable groups. However, at the end of the grace periods, the tax will revert to the standard rate of 19%.