Reduction of VAT on electricity to 5 percent in Cyprus

The Cypriot government has implemented a reduction of the Value Added Tax (VAT) on electricity for residential consumers to 5 percent. This support measure is effective from May 1, 2026, and will remain in force until March 31, 2027, as part of an official government relief package intended to mitigate high energy costs.

While the reduction provides temporary relief, concerns persist regarding the period following the policy's expiration. Critics note that returning the VAT rate to the standard 19 percent in an environment of high pre-tax energy prices—often attributed to long-standing energy infrastructure delays—could place a significant burden on households. Under EU Directive 2022/542, member states are permitted to apply a reduced VAT rate of at least 5 percent on electricity. Therefore, the implementation of a 19 percent rate is considered a national fiscal and political decision rather than an obligation imposed by European Union law, with several other member states opting to maintain lower rates.