BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state authorities have reached an agreement to lower the energy tax on petrol and diesel by 14 cents per litre, and when including the reduced value-added tax, the overall tax burden on fuel will decrease by approximately 17 cents per litre. This measure is set to be in effect from Oct. 1 through Dec. 31, 2026. The German cabinet has given its approval to the draft legislation, which is now awaiting parliamentary consideration. This initiative reintroduces a temporary fuel-tax rebate that was previously utilized earlier this year, as pump prices climbed once again.
The newly proposed fuel tax relief package in Germany amounts to about €2.5 billion in total assistance for consumers and businesses. The federal states will contribute €1.25 billion through a fixed share of VAT revenue. Before it can be enacted, the legislation must secure approval from both the Bundestag and the Bundesrat. The measure has been coordinated with state governments and coalition parliamentary groups, although as of Sept. 22, it had not yet completed the parliamentary approval process necessary for the scheduled October implementation.
During May and June 2026, Germany previously implemented a similar reduction in fuel taxes, which lowered the energy tax on petrol and diesel by 14.04 cents per litre. The related VAT reduction increased the total tax relief to roughly 17 cents per litre. Subsequently, the Federal Cartel Office and Independent Monopolies Commission found that retailers mostly transferred this reduction to consumers. That earlier rebate ended on June 30, restoring the regular energy-tax rates before the new package was drafted.
Tax Cuts Aim to Lower Petrol and Diesel Expenses
The new legislation employs the same fundamental approach to decrease costs on petrol and diesel, with a direct energy-tax cut of 14 cents per litre. Since VAT is calculated on the taxable retail amount, it also decreases due to the lower energy tax, resulting in an overall reduction of about 17 cents per litre. It’s important to note that retail fuel prices can still vary among different filling stations, as they are influenced by wholesale costs, distribution expenses, and individual station pricing strategies.
The federal government announced this package following another sharp rise in fuel prices during September, driven by approximately a 30% increase in world oil prices amid renewed Middle East conflicts and disruptions through the Strait of Hormuz. These developments coincided with higher petrol and diesel prices throughout Germany. The €2.5 billion relief covers both private vehicle owners and commercial entities purchasing road fuel, representing an estimated total benefit during the three-month period ending in December.
Previous Rebate Sets a Recent Benchmark
The earlier rebate, which was effective from May 1 through June 30, temporarily reduced energy-tax rates for petrol and diesel for two months. Including VAT, the relief matched the current proposal at around 17 cents per litre. That measure is estimated to have caused a revenue loss of approximately €1.6 billion. The planned October package extends a similar form of relief over three months, covering the final quarter of 2026.
The latest draft specifies October 1 as the start date and December 31 as the end date. Parliamentary approval remains the last legislative step before the measure can be implemented. After the cabinet’s approval, the Bundestag and Bundesrat are expected to review and approve the proposal. The finalized package includes a 14-cent reduction in energy tax and an overall tax relief of approximately 17 cents per litre, with the states contributing €1.25 billion toward the total €2.5 billion cost of this temporary fuel-tax reduction.