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. When combined with a reduced value-added tax, this measure aims to cut the overall fuel tax burden by roughly 17 cents per litre. The temporary relief is scheduled to be in effect from October 1 through December 31, 2026. The cabinet has given its approval to the draft legislation for parliamentary review. This package reinstates a temporary fuel-tax rebate previously used earlier this year, as pump prices increased once again.
The proposed fuel tax reduction scheme will total around €2.5 billion in relief for both consumers and businesses. The federal states will contribute €1.25 billion through a fixed share of VAT revenue. The legislation still requires approval from the Bundestag and Bundesrat before it can be implemented. Officials have coordinated the plan with state governments and coalition parliamentary groups. As of September 22, the proposal was still awaiting the necessary parliamentary approval to commence in October.
Germany previously implemented a similar fuel-tax reduction during May and June 2026. That measure lowered the energy tax on petrol and diesel by 14.04 cents per litre, with the VAT reduction resulting in an overall tax relief of approximately 17 cents per litre. Later, the Federal Cartel Office and the Independent Monopolies Commission found that retailers largely passed the tax reduction on to consumers. The earlier rebate concluded on June 30, restoring the usual energy-tax rates before the new package was prepared.
Tax relief targets petrol and diesel costs
The new measure employs the same basic tax reduction mechanism to lower costs on petrol and diesel. The direct energy-tax cut amounts to 14 cents per litre. Additionally, VAT decreases because the taxable retail price drops with the reduction in energy tax. This combined effect results in an overall tax relief of approximately 17 cents per litre. Nevertheless, fuel prices at different stations may vary due to wholesale costs, distribution expenses, and individual station pricing strategies.
The federal government announced this package after fuel prices surged sharply in September. It stated that global oil prices had increased by about 30% following renewed Middle East conflicts and disruptions through the Strait of Hormuz. These developments led to higher petrol and diesel prices across Germany. The tax package is aimed at both private drivers and businesses purchasing road fuel. Its €2.5 billion value reflects the estimated total relief during the three months ending in December.
Recent rebate serves as recent reference point
The previous rebate was introduced on May 1 and lasted until June 30. It reduced the energy-tax rates for petrol and diesel for two months, with VAT reductions bringing total relief to around 17 cents per litre—matching the scale of the current proposal. That earlier initiative resulted in an estimated revenue loss of about €1.6 billion. The October package maintains a similar relief structure over three months, covering the final quarter of 2026.
The draft legislation sets October 1 as the start date and December 31 as the end date. Parliamentary approval is the final step before the measure is enacted. After the cabinet’s endorsement of the draft, both the Bundestag and Bundesrat will review the proposal. The confirmed plan includes a 14-cent reduction in energy tax and about 17 cents per litre in total tax relief. Germany’s states will contribute €1.25 billion toward the total €2.5 billion cost of this temporary fuel-tax reduction.