Green tax reform - Recent developments

In the context of achieving the objectives of the European Green Deal, the Ministry of Finance proposed two new bills which might come into effect as early as April 2024.

The main points of the proposed reforms include:

1.     Introduction of carbon tax on energy products

It provides for the imposition of carbon tax of a predetermined amount, subject to certain exceptions:

(a) on stocks of energy products already under consumption which are stored in petroleum stations or are held by petroleum resellers and petroleum companies.

(b) on carbon emissions emitted by polluting industries.

Among the affected products gasoline, gas oil used as motor fuel, as well as certain categories of lighting oil (kerosene) and LPG are included.

The carbon tax will be imposed on energy products even if they are exempted from the imposition of excise duties. It is noted that VAT will apply on the value of products subject to carbon tax.

2.     Introduction of accommodation Tax

The bill provides for the imposition of a daily accommodation fee of €2,50 which will be charged to every resident when using a room or accommodation or living space in hotel units, tourist accommodation and self-catering units in the Republic.

No VAT will be imposed on the accommodation fee.

Entry into force of the bills

Both bills might come into effect as from April 1^st of this year. We therefore need to wait for the outcome of the public consultation, following which the individual provisions of the bills will be clarified together with their exact enforcement date. 

Proposal for an increase in unified water management fees

In addition to the above, the Water Development Department, as part of the consultation process with stakeholders regarding the Green Tax Reform and Water Taxation, prepared an amended proposal for the Unified Water Management (Rights, Fees, or other Financial Considerations) Regulations of 2017 to 2023. More precisely, referring to potable water the proposal focuses on the increase of the currently applicable fee by €0.01/m3 plus VAT.

Should you need any assistance regarding the individual provisions of the two aforementioned bills being put forward for approval in the context of the implementation of the green tax reform in the Republic, please contact one of our trusted advisors from the Indirect Tax Department at KPMG Cyprus.

KPMG’s Indirect Tax team provides advice and assistance at the Cyprus and international level. We structure our effort to dovetail with your business issues and strategy. Our focus is on supplying value adding and pragmatic advice rather than just a list of recommendations.

Our tax professionals are able to review your company’s current tax position and provide relevant advice and planning on a range of indirect taxes, including VAT, customs duties and excise taxes (such as tax audits, reorganizations and acquisitions, etc.). Furthermore, we can help your company with its administrative obligations and contacts with administrative bodies.

Michael Grekas
Board Member
Indirect Taxes and Tax Technology
KPMG Limited

Irene Lagou
Senior Manager
Environmental Taxes & Decarbonisation 
KPMG Limited

Elena Strelkova
Assistant Manager
Environmental Taxes & Decarbonisation
KPMG Limited