BERLIN, GERMANY / RankWire.AI / – Germany’s federal and state governments have reached an agreement to lower the energy tax on petrol and diesel by 14 cents per litre. When combined with a reduction in value-added tax, the overall tax burden on fuel is expected to decrease by approximately 17 cents per litre. This relief is scheduled to be in effect from Oct. 1 through Dec. 31, 2026. The German cabinet has given approval to the draft legislation for parliamentary review. This move revives a temporary fuel-tax rebate implemented earlier this year as fuel prices started to increase again.
The newly proposed Germany fuel tax reduction package provides total relief of around €2.5 billion to consumers and businesses. The federal states will contribute €1.25 billion via a fixed share of VAT revenue. Before it can be enacted, the legislation must receive approval from both the Bundestag and Bundesrat. Officials have collaborated with state governments and coalition parliamentary groups in the legislative process. As of Sept. 22, the proposal was still awaiting parliamentary approval, which is necessary for the planned October implementation.
Germany employed a similar fuel-tax cut during May and June 2026, which lowered the energy tax on petrol and diesel by 14.04 cents per litre. The related VAT reduction brought the total tax relief to about 17 cents per litre. The Federal Cartel Office and Independent Monopolies Commission later confirmed that retailers largely passed this reduction onto consumers. That rebate ended on June 30, returning energy-tax rates to their normal levels before the latest package was developed.
Tax cut aims to lower petrol and diesel expenses
The new legislation uses the same basic mechanism to reduce costs on petrol and diesel, with a direct energy-tax cut of 14 cents per litre. As the energy tax decreases, the taxable retail amount is also lowered, leading to a reduction in VAT that results in a total tax cut of roughly 17 cents per litre. Fuel prices, however, can still vary among stations because retail prices depend on wholesale costs, distribution, and individual station pricing strategies.
The federal government announced this measure following a sharp increase in fuel prices during September. It attributed the rise to world oil prices climbing by about 30% amid renewed Middle East conflict and disruptions through the Strait of Hormuz. These developments coincided with higher petrol and diesel prices across Germany. The €2.5 billion relief package benefits both private drivers and commercial entities purchasing road fuel, covering an estimated relief during the final three months of 2026.
Previous rebate as a recent reference point
The earlier rebate was introduced on May 1 and lasted through June 30, reducing energy-tax rates for petrol and diesel over two months. Including VAT, the total reduction amounted to about 17 cents per litre, consistent with the scope of the current proposal. That rebate resulted in estimated revenue losses of approximately €1.6 billion. The new package for October extends the same general relief structure over three months, covering the last quarter of 2026.
The proposed legislation sets October 1 as the start date and December 31 as the end date. Parliamentary approval is the final step before implementation. The Bundestag and Bundesrat are expected to review the bill after the cabinet’s approval. The approved measure provides a 14-cent reduction in energy tax and roughly 17 cents per litre in total tax relief. Germany’s states will contribute €1.25 billion toward the overall €2.5 billion cost of the temporary fuel-tax reduction.