The Cyprus House of Representatives voted on 23 October 2026 to reduce the excise duty on heating oil from EUR 0.33 to EUR 0.28 per litre, effective 1 April 2027, in response to a 40% year-on-year increase in global crude oil prices. The amendment to the Excise Duty Law (N. 395/2026) was passed with a broad majority after the Ministry of Finance warned that the current rate would push household heating costs above 15% of median disposable income by winter 2027. The reduced rate will apply for a period of 12 months, after which it will be reviewed based on international price benchmarks. The fiscal cost is estimated at EUR 45 million in foregone revenue for 2027, partially offset by higher VAT receipts from increased consumption.
Key Takeaways
- Targeted Relief for Households and SMEs: The excise cut translates to an average annual saving of EUR 75 per household using 1,500 litres of heating oil. Small and medium enterprises in the hospitality and agricultural sectors, which rely heavily on heating oil for space heating and greenhouse operations, are projected to save up to EUR 2,500 annually. The Ministry has directed the Consumer Protection Service to monitor retail prices weekly to ensure full pass-through.
- Fiscal Safeguards and Review Clause: The legislation includes a sunset clause requiring the Finance Minister to submit a review report to Parliament by 31 January 2028. If crude oil prices fall below USD 70 per barrel for three consecutive months, the excise rate will automatically revert to EUR 0.33/litre. This mechanism aims to prevent structural revenue erosion while maintaining flexibility.
- Alignment with EU Energy Taxation Directive Revision: The move anticipates the revised EU Energy Taxation Directive (ETD), currently in trilogue negotiations, which proposes a minimum heating oil excise rate of EUR 0.25/litre from 2028. Cyprus’s new rate of EUR 0.28/litre positions the country above the proposed EU floor, avoiding future compliance adjustments.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement