The Spanish government announced the end of the reduced VAT rate on fuel, replacing it with a direct discount at petrol stations that would decline over the coming months. Drivers were initially due to receive 15 cents per litre in July, falling to 10 cents in August. The schedule called for 5 cents in September, with the discount due to end in October. Economy Minister Carlos Cuerpo announced the decision after an early Council of Ministers meeting. It was intended to adapt relief measures to the normalisation of crude oil prices while avoiding an abrupt change for consumers.
The policy later evolved. Under Royal Decree-Law 25/2026, approved on 29 September 2026 and in force from 1 October, Spain maintained a reduction in the Hydrocarbon Tax for commonly used unleaded petrol and road diesel. The relief was set at €0.20 per litre in October, €0.13 in November and €0.06 in December. Later validated by Congress, the decree turned the planned withdrawal into a phased reduction through the end of the year. Spanish coverage by Radio Murcia/ORM described the arrangement as a continuation of the fuel discounts. The decree also tasked the National Commission on Markets and Competition (CNMC) with studying the measures’ effectiveness and strengthened sanctions in the hydrocarbons sector.
Cuerpo said the government would closely monitor international oil prices and inflation. The safeguard mechanism linked continued relief to a threshold of more than 15% growth in petrol or diesel prices over the relevant comparison period. If triggered, the higher reduction could remain in place instead of falling to the next scheduled level. The package also provided for possible electricity-tax and VAT relief under specified conditions, including a reduction of the electricity tax to 0.5%. The government planned tighter oversight of petrol-station pricing, including publishing lists of outlets with irregular pricing practices.
During congressional debate, Cuerpo said the tax reduction had been “effectively passed through to prices.” Reporting by Expansión quoted him saying CNMC monitoring found 100% pass-through of the latest reduction within days across virtually the entire petrol-station network. He estimated the resulting consumer savings amounted to nearly 60% of the cost of petrol and about 40% of the cost of diesel. Those figures referred to the tax reduction’s impact on retail prices, not to the government paying that share of consumers’ total fuel bills.
Support for professional transport workers and the primary sector was to remain unchanged, with a 20-cent-per-litre discount still in place. The government also planned to increase aid for farmers purchasing fertilisers by €165 million, supplementing the existing €500 million fund. The adjustment anticipated higher fertiliser costs expected in September. The government presented its approach as a mix of temporary relief and longer-term structural measures, including renewable energy and electrification.
Among the structural changes approved, the tax rate on electricity production was to fall from 7% to 5% for the rest of the year, then to 3.5% in 2027, before being eliminated in 2028. Described as costly for the budget, the measure was intended to accelerate electrification of the Spanish economy. The total fiscal impact was estimated at €1.825 billion for the year, with a further €2.7 billion in reduced tax revenue expected in 2027 and 2028. Sara Aagesen, Minister for Ecological Transition and Demographic Challenge, said the changes could lower household electricity bills by around 6%. The government also planned to simplify regulations and speed up permitting to boost renewable-energy deployment.
Labour protections linked to the Middle East conflict remained in force. They included a ban on dismissals by companies receiving related aid and a requirement for sustainable mobility plans for workers. The measures reflected the government’s stated strategy of balancing short-term relief with the long-term change of Spain’s energy and economic field.
The shift in fuel policy came amid wider political debates over government direction and economic management. Recent calls from Junts for a change in national leadership, for example, were reported in a recent analysis of political pressure on Pedro Sánchez. They highlight the complex environment in which these fiscal decisions are being made.
Spain’s approach to fuel pricing and energy taxation is part of a wider European effort to adapt crisis-era relief as global markets stabilise. The phased reduction was designed to limit abrupt changes for households and businesses. Targeted aid for basic sectors and investment in renewables aimed to support longer-term ability to recover. The decree’s monitoring and enforcement provisions also addressed whether tax relief was reaching consumers at the pump. Cuerpo said the broader package sought to protect households and the economic sectors most affected by rising energy prices while strengthening Spain’s energy sovereignty.
