The Spanish government will phase out the reduced VAT on fuel, replacing it with a direct discount at the pump. The measure starts at 15 cents per litre in July and will disappear by October. Support for transport and agriculture remains unchanged.
The Spanish government has announced the end of the reduced VAT rate on fuel, shifting instead to a direct discount at petrol stations that will decrease over the coming months. Starting in July, drivers will receive a 15-cent discount per litre, which will drop to 10 cents in August and 5 cents in September, before being fully withdrawn in October. The decision, revealed by Economy Minister Carlos Cuerpo after an early Council of Ministers meeting, aims to adapt relief measures to the ongoing normalization of crude oil prices and avoid abrupt changes for consumers.
According to Cuerpo, the government will monitor international oil prices and inflation closely. If fuel inflation exceeds 15%, the previous 20-cent per litre reduction could be reinstated. The authorities also plan to strengthen oversight of petrol station pricing, granting the CNMC (National Commission on Markets and Competition) new powers, including publishing lists of outlets with irregular pricing practices.
Support for professional transport workers and the primary sector will remain unchanged, with a 20-cent per litre discount still in place. Additionally, the government will increase aid for farmers purchasing fertilizers by €165 million, supplementing the existing €500 million fund. This adjustment anticipates higher fertilizer costs expected in September. The government maintains its approach of combining immediate, temporary support with longer-term structural measures, such as promoting renewable energy and electrification.
Among the structural changes approved, the tax rate on electricity production will be reduced from 7% to 5% for the rest of the year, then to 3.5% in 2027, and eliminated entirely in 2028. This move, described as costly for the budget, is intended to accelerate the electrification of the Spanish economy. The total fiscal impact is estimated at €1.825 billion for this year, with an additional €2.7 billion in reduced tax revenue expected in 2027 and 2028. Minister for Ecological Transition and Demographic Challenge, Sara Aagesen, stated that these changes could lower household electricity bills by around 6%. The government also plans to streamline regulations and accelerate permits to boost renewable energy deployment.
Labour protections linked to the Middle East conflict remain in force, including the ban on dismissals for companies receiving related aid and the requirement for sustainable mobility plans for workers. These measures reflect the government's ongoing strategy of balancing short-term relief with long-term transformation of Spain's energy and economic landscape.
This shift in fuel policy comes amid broader political debates over government direction and economic management. For example, recent calls from Junts for a change in national leadership, as reported in a recent analysis of political pressure on Pedro Sánchez, 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 trend of adapting crisis-era relief measures as global markets stabilize. The gradual withdrawal of direct support is designed to minimize shocks for households and businesses, while targeted aid for key sectors and investments in renewables aim to secure long-term resilience. The government’s commitment to transparency and oversight in fuel pricing also responds to ongoing concerns about market fairness and consumer protection.
