BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state authorities have agreed on a plan to lower the energy tax on petrol and diesel by 14 cents per litre. When combined with a reduced value-added tax, the overall tax reduction on fuel amounts to roughly 17 cents per litre. This tax relief is set to be in effect from October 1 until December 31, 2026. The cabinet has endorsed the draft legislation, which now awaits parliamentary approval. This initiative brings back a temporary fuel-tax rebate that was previously used earlier this year as pump prices climbed once again.
The newly proposed fuel tax relief package in Germany amounts to approximately €2.5 billion in savings for consumers and businesses. The federal states are expected to contribute €1.25 billion through a fixed share of VAT revenue. Before implementation, the legislation must be approved by both the Bundestag and the Bundesrat. Officials have coordinated this measure with state governments and coalition parliamentary groups. As of September 22, the proposal had not yet completed the legislative approval process required for an October start date.
A similar fuel tax reduction was employed in Germany during May and June 2026, which decreased the energy tax on petrol and diesel by 14.04 cents per litre. The VAT reduction associated with this measure resulted in an overall tax relief of about 17 cents per litre. The Federal Cartel Office and Independent Monopolies Commission later confirmed that retailers largely passed this reduction on to consumers. This earlier rebate ended on June 30, returning energy-tax rates to their normal levels before the latest package was drafted.
Tax relief aims to lower petrol and diesel prices
The new measure employs the same fundamental tax reduction mechanism to decrease costs for petrol and diesel. The direct energy-tax cut is 14 cents per litre. Since VAT is calculated on the retail amount, it also decreases because the taxable amount drops with the lower energy tax. Consequently, the total tax reduction reaches approximately 17 cents per litre. Retail prices at different filling stations may still vary because of wholesale costs, distribution expenses, and individual station pricing strategies.
Germany announced the package following a sharp rise in fuel prices during September, driven by a roughly 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 nationwide. The tax relief covers both private drivers and commercial entities purchasing road fuel. Its €2.5 billion estimated value reflects the combined relief expected over the three-month period ending in December.
Recent rebate as a recent reference point
The previous rebate was introduced on May 1 and lasted until June 30, reducing energy-tax rates for petrol and diesel for two months. Including VAT, the total reduction was about 17 cents per litre, aligning with the current proposal. That rebate resulted in an estimated €1.6 billion loss in tax revenue. The new package for October extends a similar type of relief over three months, covering the final quarter of 2026.
The legislation plans to start on October 1 and end on December 31. The final legislative step requires approval from both the Bundestag and the Bundesrat. Once approved by the cabinet, the measure will proceed to parliamentary consideration. The package confirms a 14-cent reduction in energy tax and an overall tax relief of about 17 cents per litre. The total cost of this temporary fuel-tax measure, estimated at €2.5 billion, will be shared by the German states contributing €1.25 billion.