BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state authorities have reached an agreement to cut the energy tax on petrol and diesel by 14 cents per litre. When combined with a lower value-added tax, this package aims to decrease the overall tax burden on fuel by roughly 17 cents per litre. The relief is set to be in effect from Oct. 1 through Dec. 31, 2026. The German cabinet has approved the proposal for parliamentary review. This initiative reintroduces a temporary fuel-tax rebate that was used earlier this year as pump prices increased again.
The new fuel tax relief plan in Germany is expected to benefit consumers and businesses by approximately €2.5 billion in total. The federal states will contribute €1.25 billion through a fixed share of VAT revenue. The legislation still needs approval from both the Bundestag and Bundesrat before it can be enacted. Officials have coordinated the plan with state governments and coalition parliamentary groups. As of Sept. 22, the proposal had not yet completed the necessary parliamentary approval process to allow for the scheduled October implementation.
A similar reduction in fuel taxes was applied in Germany during May and June 2026. During that period, the energy tax on petrol and diesel was lowered by 14.04 cents per litre. The associated VAT reduction resulted in a total tax relief of around 17 cents per litre. Subsequently, the Federal Cartel Office and the Independent Monopolies Commission found that retailers largely passed this reduction on to consumers. That rebate concluded on June 30, after which the standard energy-tax rates were reinstated before the current package was developed.
Tax cuts aimed at lowering petrol and diesel prices
The newly proposed measure employs the same fundamental tax mechanism to reduce costs for petrol and diesel. The direct energy-tax cut of 14 cents per litre is complemented by a decrease in VAT, since the taxable retail amount drops as energy tax declines. This combined effect results in an overall tax reduction of around 17 cents per litre. However, retail prices can still vary between filling stations, as they are also influenced by wholesale costs, distribution expenses, and individual station pricing strategies.
The federal government announced this package following another significant surge in fuel prices in September. They cited a roughly 30% increase in world oil prices due to the renewed Middle East conflict and disruptions through the Strait of Hormuz. These developments coincided with rising petrol and diesel costs across Germany. The tax relief aims to support both private drivers and commercial entities purchasing road fuel. Its €2.5 billion total reflects an estimated combined benefit during the three months ending in December.
Previous rebate as recent reference point
The earlier rebate was implemented on May 1 and lasted until June 30, reducing energy taxes on both petrol and diesel for two months. Including VAT, the reduction amounted to about 17 cents per litre, matching the scope of the current proposal. That measure led to estimated revenue losses of approximately €1.6 billion. The upcoming October package extends this kind of relief over three months, covering the final quarter of 2026.
The current draft designates Oct. 1 as the intended start date and Dec. 31 as the end date. Final legislative approval from parliament is required before it can be enacted. Following the cabinet’s approval of the draft, the measure will be considered by the Bundestag and Bundesrat. The approved package includes a 14-cent reduction in energy tax and an overall tax relief of about 17 cents per litre. The combined cost of this temporary fuel-tax reduction will be covered by €1.25 billion contributed by Germany’s states, out of a total estimated expenditure of €2.5 billion.