Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity3 replaced, with effect from 1 January 2004, Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils4 and Council Directive 92/82/EEC of 19 October 1992 on the approximation of the rates of excise duties on mineral oils5. It defines the fiscal structures and the levels of taxation to be imposed on energy products and electricity.

The minimum rates set by Directive 2003/96/EC are liable to create serious economic and social difficulties for certain Member States, namely Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovenia and Slovakia, in view of the comparatively low level of excise duties previously applied, the ongoing economic transition of those Member States, their relatively low income levels and their limited ability to offset that additional tax burden by reducing other taxes. In particular, the price increases brought about by application of the minimum rates set by Directive 2003/96/EC are likely to have adverse effect on their citizens and national economies, creating for instance an unbearable burden for small and medium-sized enterprises.

Those Member States should therefore be permitted, on a temporary basis, to apply additional exemptions from or reduced levels of taxation, where it will not be detrimental to the proper functioning of the internal market and will not result in the distortion of competition. Moreover, consistent with the principles in accordance with which transitional periods were originally granted under Directive 2003/96/EC, any such measures should be designed to bring about a progressive alignment with the applicable Community minimum rates.

The 2003 Treaty of Accession6 provides for transitional arrangements, in the case of Poland and Cyprus, for the implementation of Directives 92/8 I/EEC and 92/82/EEC. The Treaty also provides for specific measures on issues relating to energy in Lithuania and Estonia. Those measures should be adequately taken into account in the context of permitting dedicated tax exemptions.

This Directive should not prejudice the outcome of any procedures relating to distortions of the operation of the single market that may be undertaken, in particular under Articles 87 and 88 of the Treaty. It should not override the requirement for Member States to notify instances of potential State aid to the Commission under Article 88 of the Treaty.

Certain provisions of Directive 2003/96/EC should be clarified as regards the references to the transitional period set out therein.

Directive 2003/96/EC should therefore be amended accordingly,