BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state governments have agreed to reduce the energy tax on petrol and diesel by 14 cents per litre. When combined with lower value-added tax, this measure is expected to cut the overall fuel tax burden by approximately 17 cents per litre. The temporary relief will be in effect from Oct. 1 through Dec. 31, 2026. The cabinet has approved the draft legislation for parliamentary review. This initiative reintroduces a fuel-tax rebate previously used earlier this year as pump prices climbed again.
The newly proposed fuel tax package in Germany offers a total relief of around €2.5 billion 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 be approved by both the Bundestag and Bundesrat. Authorities have coordinated the measure with state governments and coalition parliamentary groups. As of Sept. 22, the proposal had not yet completed the parliamentary approval process required for the planned October implementation.
In May and June 2026, Germany previously implemented a similar reduction in fuel taxes. That measure lowered the energy tax on petrol and diesel by 14.04 cents per litre, with the VAT reduction resulting in a total tax relief of around 17 cents per litre. The Federal Cartel Office and the Independent Monopolies Commission later confirmed that most retailers passed the reduction onto consumers. This earlier rebate concluded on June 30, restoring the standard energy-tax rates before the current package was prepared.
Tax cut aims to lower petrol and diesel expenses
The new legislation employs the same fundamental tax mechanism to decrease costs for petrol and diesel. The direct energy-tax reduction is set at 14 cents per litre, while VAT decreases because the taxable retail amount drops when the energy tax is reduced. This combined effect results in an overall tax relief of roughly 17 cents per litre. Nevertheless, retail fuel prices can vary between stations due to wholesale costs, distribution expenses, and individual station pricing strategies.
The federal government announced the package following another sharp increase in fuel prices during September. They cited world oil prices rising by about 30% amid renewed Middle East conflict and disruptions through the Strait of Hormuz. These developments contributed to higher petrol and diesel prices across Germany. The relief package applies to both private drivers and commercial entities purchasing road fuel. The €2.5 billion estimate reflects the total relief expected over the three-month period ending in December.
Recent rebate offers a reference point for current plans
The previous rebate, active from May 1 to June 30, reduced energy taxes on petrol and diesel for two months. Including VAT, the total reduction was about 17 cents per litre, matching the current proposal’s scope. That earlier measure resulted in estimated tax revenue losses of roughly €1.6 billion. The October plan extends a similar form of relief over three months, covering the final quarter of 2026.
The current draft sets October 1 as the start date and December 31 as the end date. Final approval from parliament remains necessary before the measure can be implemented. Following the cabinet’s endorsement of the draft, the Bundestag and Bundesrat will review the legislation. The approved package provides a 14-cent reduction in energy tax and an overall tax relief of about 17 cents per litre. Germany’s states will contribute €1.25 billion toward the €2.5 billion total cost of the temporary fuel-tax reduction.