BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state authorities have reached an agreement to reduce the energy tax on petrol and diesel by 14 cents per litre. When factoring in reduced value-added tax, the overall tax reduction for fuel amounts to roughly 17 cents per litre. This measure is set to be in effect from Oct. 1 until Dec. 31, 2026. The German cabinet has given its approval to the draft legislation, moving it forward for parliamentary debate. This initiative revives a temporary fuel-tax rebate previously used earlier this year, as fuel prices increased once again.
The new fuel tax relief package in Germany will provide approximately €2.5 billion in total support for consumers and businesses. The federal states will contribute €1.25 billion through a fixed proportion of VAT revenue. The legislation still needs approval from both the Bundestag and the Bundesrat before it can be enacted. Officials have coordinated with state governments and coalition parliamentary groups to ensure consensus. As of Sept. 22, the proposal had not yet completed the necessary parliamentary approval process required for a scheduled start in October.
Germany previously used a similar fuel-tax reduction during May and June 2026. That measure cut the energy tax on petrol and diesel by 14.04 cents per litre. The VAT reduction associated with it resulted in a total tax relief of about 17 cents per litre. Later, the Federal Cartel Office and Independent Monopolies Commission determined that retailers largely transferred the reduction to consumers. The earlier rebate ended on June 30, restoring the standard energy tax rates before the latest package was drafted.
Tax cuts aim to lower petrol and diesel expenses
The upcoming measure applies the same fundamental tax mechanism to reduce the costs of petrol and diesel. The direct energy-tax cut is set at 14 cents per litre, while VAT diminishes due to the lower taxable retail amount, which results from the decreased energy tax. This combined effect yields an approximate 17-cent reduction per litre. Retail prices at filling stations may still vary, as they also depend on wholesale costs, distribution expenses, and individual station pricing strategies.
The federal government announced this package following another sharp rise in fuel prices during September. The increase was driven by a roughly 30% surge in global oil prices amid renewed Middle East conflicts and disruptions through the Strait of Hormuz. These developments coincided with higher petrol and diesel costs across Germany. The tax relief is intended to benefit both private drivers and commercial entities purchasing road fuel. The €2.5 billion estimate represents the total relief expected over the three-month period ending in December.
The earlier rebate serves 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 over two months. Including VAT, this reduction matched the current proposal at around 17 cents per litre. That earlier initiative resulted in estimated tax revenue losses of about €1.6 billion. The new package extends similar relief measures over three months, covering the final quarter of 2026.
The draft legislation specifies October 1 as the start date and December 31 as the conclusion. Final approval from parliament is necessary before implementation. Both the Bundestag and the Bundesrat are expected to review and approve the measure following the cabinet’s endorsement of the draft. The approved package provides a 14-cent reduction in energy tax and about 17 cents per litre in total tax relief. The overall €2.5 billion cost will be partly covered by €1.25 billion contributed by Germany’s states, making this a significant temporary intervention in fuel taxation.