BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state governments have reached an agreement to lower the energy tax on petrol and diesel by 14 cents per litre. When combined with a reduced value-added tax, this package aims to cut the overall fuel tax burden by approximately 17 cents per litre. The proposed relief is set to be in effect from Oct. 1 through Dec. 31, 2026. Germany’s cabinet has approved the draft legislation for parliamentary review. This initiative revives a temporary fuel-tax rebate previously used earlier this year as pump prices increased again.
The new fuel tax relief plan in Germany is projected to provide around €2.5 billion in support to consumers and businesses. The federal states will contribute €1.25 billion via a fixed portion of VAT revenue. Before it can be enacted, the legislation still requires approval from both the Bundestag and the Bundesrat. The measure has been coordinated with state governments and coalition parliamentary groups. As of Sept. 22, the proposal had not yet completed the parliamentary approval process necessary for a scheduled October start.
During May and June 2026, Germany implemented a similar reduction in fuel taxes, lowering the energy tax on petrol and diesel by 14.04 cents per litre. The reduction in VAT alongside the energy tax brought the total tax relief to approximately 17 cents per litre. The Federal Cartel Office and the Independent Monopolies Commission later confirmed that retailers largely transferred the reduction to consumers. That earlier rebate concluded on June 30, returning to the standard energy-tax rates before the current package was drafted.
Tax Relief Targets Petrol and Diesel Expenses
The new legislation employs the same basic tax mechanism to reduce costs for petrol and diesel. The direct energy-tax cut is 14 cents per litre, while VAT decreases because the taxable retail amount is lowered due to the reduced energy tax. This combined effect results in an overall tax reduction of roughly 17 cents per litre. However, retail fuel prices can vary among stations because they also depend on wholesale costs, distribution expenses, and station-specific pricing strategies.
The federal government announced this package following a significant increase in fuel prices during September. They noted that global oil prices surged by about 30% amid renewed Middle East conflicts and disruptions through the Strait of Hormuz. These developments contributed to higher petrol and diesel prices across Germany. The tax reduction targets both private drivers and commercial entities purchasing road fuel. With an estimated total relief of €2.5 billion over three months, the relief aims to mitigate the recent price increases until December.
Recent Rebate Sets Benchmark for Current Measures
The previous rebate, introduced on May 1 and lasting until June 30, reduced energy-tax rates on petrol and diesel for two months. Including VAT, the reduction was approximately 17 cents per litre, consistent with the current proposal. That earlier measure resulted in estimated revenue losses of around €1.6 billion. The new package extends similar relief across the final quarter of 2026, lasting three months from October 1 to December 31.
The proposed start date is October 1, with a planned expiration on December 31. Parliamentary approval remains the final step before implementation. Following the cabinet’s approval of the draft, the measure will be considered by the Bundestag and Bundesrat. The approved package provides a 14-cent reduction in energy tax and an overall tax relief of approximately 17 cents per litre. Germany’s states will contribute €1.25 billion towards the total €2.5 billion cost of this temporary fuel-tax reduction.