Portugal adds 3 cents to fuel tax discount as 2026 relief reaches 700 million euros

Tax relief expansion

Portuguese authorities announced a 3-cent increase in the fuel tax discount on diesel and petrol on 4 September 2026. Minister of the Presidency António Leitão Amaro presented the measure following a Council of Ministers meeting in Lisbon. The adjustment raises the total cumulative discount under the Tax on Petroleum Products (ISP) to 23 cents per liter for both fuel types. The reinforced relief takes effect on Monday, 7 September 2026, aimed at limiting retail price increases at filling stations. Leitão Amaro stated that the support applies across the country, with slightly higher relief for diesel and slightly lower for petrol, with value-added tax included.

Price pressures and market forecasts

The tax intervention follows weeks of price volatility driven by international crude markets, tensions in the Middle East, and shipping risks around the Strait of Hormuz. Since hostilities involving the United States, Israel, and Iran began, diesel prices in Portugal have increased by approximately 36 cents per liter, while petrol prices climbed 25 cents. The Automóvel Club de Portugal projected next-week price increases of 15 cents per liter for diesel and 12 cents for petrol without fiscal adjustments. The National Association of Fuel Retailers (ANAREC) estimated diesel could rise 15 cents and petrol 10 cents per liter, while other market forecasts anticipated increases of 13.5 cents for diesel and 11.5 cents for petrol. According to the Directorate-General for Energy and Geology (DGEG), average prices for the week ending 31 August 2026 stood at 2.029 euros for simple diesel and 2.013 euros for simple petrol 95. DGEG projections based on Thursday market closing values indicated diesel could reach 2.169 euros per liter and petrol 95 could rise to 2.142 euros per liter before final pump variations by brand and location.

Budgetary impact and fiscal policy

Speaking at the 35th Dão Wine Fair in Nelas, Prime Minister Luís Montenegro detailed the state expenditures tied to fuel subsidies and rejected calls to cut value-added tax directly on fuel. Montenegro noted that the ISP rebate totals around 700 million euros in 2026. He stated that the government returns excess VAT revenue through the ISP discount rather than collecting additional tax receipts from price increases. Measures introduced specifically since the conflict began have exceeded 300 million euros, covering the ISP discount, professional diesel support, and the solidary gas bottle subsidy.

The country is making a very significant effort, which needs to be monitored, and, if there is a constant oscillation, as there has been over the last four weeks, if it continues, the Government is obviously available to deal with this evolution by adopting the measures that seem most appropriate to us.

Sectoral aid and broader economic measures

The prime minister noted that the government is finalizing a proposal to resume extraordinary support for colored agricultural diesel, a program that had expired in June 2026. Montenegro connected the fuel response to broader fiscal policies, pointing to four personal income tax cuts, two corporate tax reductions, and municipal property transfer tax exemptions for young homebuyers. The government maintains that the ISP discount is visible directly on consumer fuel invoices, allowing drivers to verify the state deduction at the pump.