Cyprus will extend its reduced fuel consumption tax by ten weeks, keeping pump prices at least 8.33 cents per litre lower until November 30, 2026, MPs heard yesterday. Fuel prices are set to rise significantly from 2028, however, under new EU rules on renewable fuel use in transport and aviation.
The tax measure has been in place since April and had been due to expire on September 17. A bill extending it will now go before the Cabinet at its next meeting.
Even with the extension, consumers face steep month-on-month increases in fuel and many retail goods, particularly food, driven by rising inflation.
The fuel tax cut was one of eight measures the government introduced in April to support the real economy, households and businesses. A reduced five per cent VAT rate on electricity will remain in place for all domestic consumers until March 31, 2027, while zero VAT on specific product categories will stay in effect until the end of 2026.
Harmonisation
Regardless of how inflation develops in the coming period, the first fuel price increases driven by EU rules are expected in 2028, once Cyprus harmonises its legislation with a European directive requiring biofuel blending in transport fuels. These increases will come independently of any other price movements tied to fluctuations in international oil prices.
During yesterday’s discussion of the harmonisation bill in parliament’s Energy Committee, Kyriakos Iordanou, Director-General of the Ministry of Energy, said the harmonisation would add costs to fuel. Petrol prices are expected to rise initially by 2.5 cents per litre, while diesel will increase by seven cents per litre.
According to a representative of the Energy Service, Cyprus has accepted a target for reducing greenhouse gas emissions from transport that is lower than most other EU states: an 11.5 per cent cut, compared with the 14.5 per cent target that applies to other member states.
To offset the impact of the fuel increases, the government will introduce compensatory measures for energy-poor households and vulnerable groups worth 174 million euros for the 2027-2030 period. Of this, 131 million euros will come from EU funds and 43 million euros from national funds, with grant schemes expected to begin in 2027.
The compensatory measures will cover transport and infrastructure and will be subject to income criteria. To tackle transport poverty more broadly, the government will also promote alternative means of transport, including walking, cycling and public transport.
