Excise duty on heating oil is set to fall from 7.5 cents to 2.1 cents a litre from Friday, the minimum allowed under EU rules. Cyprus has also asked the European Commission for permission to scrap the tax altogether, with a reply expected within three to four months.
Parliament is expected to approve the bill unanimously at its plenary session on Thursday. The cut will apply nine days earlier than originally planned, as the bill had provided for it to run from 1 November to 30 April.
The earlier start was a legislative initiative, taken after the government gave the green light. A Finance Ministry representative told the House Finance Committee on Monday that the cut is worth 6.39 cents a litre, including VAT, and that its cost to the state is estimated at 5.2 million euros.
Zero rate request
Cyprus submitted its request to the Commission for a derogation from the EU minimum tax level at the beginning of the month, the official said. She said she expected the Commission to accept the request to cut the duty to zero.
Parliament members objected that a reply would come too late for winter. “We may make it in time for January,” she replied. If the Commission agrees, the Finance Ministry will then set the period during which the zero rate applies.
Customs
A Customs Department representative told the committee it would be better for the cut to start on Saturday 24 October. The department’s systems need time to change the tax rate, and petrol station owners must be notified after the plenary vote so they can record their stocks, he said.
Committee chairwoman Christiana Erotokritou, a DIKO parliament member, said there was no reason not to apply the measure from Friday. She said there had been plans to hold an extraordinary plenary session so the measure could take effect earlier, and called on Customs to plan the changes earlier.
Motor fuels
AKEL parliament member Andreas Pasiourtides called on the Finance Ministry to ask the Commission to also allow a cut in excise duty on motor fuels. The EU minimum excise duty on motor fuels for 2025 is 35 cents a litre.
ALMA leader Odysseas Michaelides said Sweden had obtained a derogation from the EU last summer, cutting the minimum excise duty on motor fuels from 35.7 cents a litre to 14 cents.
The Finance Ministry said Cyprus is one of the few countries applying the minimum tax level, and that anything below it would require a derogation. Several countries that obtained derogations released their fuel stocks onto the market, which brought prices down, the committee heard. In Cyprus’s case, using stocks would be dangerous because it is an island, the committee was told.
VAT on electricity
The government is also pressing for VAT to be removed from Electricity Authority of Cyprus (EAC) bills.
At the recent EU summit, member states disagreed over support measures and the cost of emissions. Cyprus sided with the majority of member states calling for greater fiscal flexibility to allow governments to take meaningful measures against high energy prices, and supported suspending the new emissions trading system.
The summit took no substantive decisions and called on the Commission to consider, if it deemed appropriate, new measures to relieve consumers.
