Proposal for a COUNCIL IMPLEMENTING DECISION authorising Portugal to apply reduced rates of excise duty to gas oil and unleaded petrol used as motor fuels, in accordance with Article 19 of Directive 2003/96/EC
Date: 2022-08-22
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: Portugal, derogation from EU law, diesel fuel, excise duty, fuel tax, petrol, socioeconomic conditions, tax relief

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   EUROPEAN COMMISSION  Brussels, 22.8.2022  COM(2022) 408 final 2022/0251 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION authorising Portugal to apply reduced rates of excise duty to gas oil and unleaded petrol used as motor fuels, in accordance with Article 19 of Directive 2003/96/EC  
 
EXPLANATORY MEMORANDUM 

1. 

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CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Taxation  of  energy  products  and  electricity  in  the  European  Union  is  governed  by  Council 
Directive  2003/96/EC  of  27  October  2003  restructuring  the  Community  framework  for  the 
taxation  of  energy  products  and  electricity1  (the  ‘Energy  Taxation  Directive’  or  the 
‘Directive’). 

Pursuant to Article 19(1) of the Directive, in addition to the provisions laid down in particular 
in Articles 5, 15 and 17, the Council, acting unanimously on a proposal from the Commission, 
may authorise any Member State to introduce further exemptions or reductions in the level of 
taxation for specific policy considerations. 

Portugal is seeking authorisation to apply a temporary reduction of the national tax rates for 
gas oil and unleaded petrol used as motor fuels2, below the minimum levels of taxation laid 
down in Article 7 of the Directive and Table A of Annex I to the Directive. 

The  requested  period  of  validity  is  until  31  December  2022,  which  is  within  the  maximum 
period allowed by Article 19(2) of the Energy Taxation Directive. 

By  letter  dated  2  May  2022,  the  Portuguese  authorities  informed  the  Commission  of  their 
intention to apply the temporary measure. Additional information was provided on 11 and 23 
May 2022, and on 8 June 2022. 

According to the Portuguese authorities, the aim of the measure is to mitigate the high retail 
fuel  prices  associated  with  the  consumption  of  motor  fuels3,  resulting  from  the  current 
geopolitical developments, and directly affecting both households and companies.  

As regards energy prices and their trend, according to the figures provided by the Portuguese 
authorities, from the start of the year, prices (before taxes) have substantially risen for gas oil 
and for the most consumed type of unleaded petrol (gasolina 95)4.  

The table below provided by the Portuguese authorities shows the average end-of-month retail 
price together with the price components for each month from January to May 2022.  

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4 

OJ L 283, 31.10.2003, p. 51–70. 
Gas oil, CN codes 2710 19 43 to 2710 19 48, and unleaded petrol, CN codes 2710 12 41, 2710 12 45 
and 2710 12 49. 
In Portugal, 6.4 million people have a driving licence. 
Comparison done using DGEG (Direção Geral de Energia e Geologia) prices, from 21 February 2022 
until 30 May 2022. 

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According to Portugal, the excise duty appears to be the only price component on which it is 
possible  to  intervene  to  reduce  retail  prices  in  the  short  term.  Hence,  in  its  view,  the 
derogation is necessary to remedy the current spike in energy prices in Portugal.   

Indeed, according to the Portuguese authorities, it is not possible to reduce the first two price 
components  in  the  table  above  (i.e.  international  prices  for  brent  and  oil  derivatives  (CIF) 
and  unload  and  storage  costs)  because  they  are  determined  by  the  competitive  forces  of 
supply and demand in international markets.  

As  regards  the  third  price  component  in  the  table  above  (biofuel  incorporation  costs)5, 
according  to  the  Portuguese  authorities,  reducing  or  suspending  the  biofuel  incorporation 
targets would have the following negative impacts:  

(i)  

missing  the  relevant  RED  II6  targets  (thus  raising  greenhouse  gas  emissions  by 
increasing the fossil component in fuels);  

(ii)  

damaging the biofuel industry and the animal feed production industry; and 

(iii)  

increasing energy dependence due to greater use of imported fossil fuels.  

Therefore,  in  Portugal’s  view,  it  does  not  seem  reasonable  or  appropriate  to  change  the 
biofuel  incorporation  targets,  especially  for  diesel.  Additionally,  the  weight  of  biofuel 
incorporation in the PVP7 of fuels (gasoline and diesel) is less than 4%8.  

As  regards  the  fourth  price  component  in  the  table  above  (gross  margin),  in  addition  to 
other  policy  measures,  the  Portuguese  government  and  the  national  energy  regulator  have 
already put in place periodic monitoring and public disclosure of price trends, notably in view 

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At  national  level,  Decree  Law  117/2010  of  2  October  2010,  in  its  current  wording,  lays  down  a 
mandatory incorporation target for biofuels of 11%. 
Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the 
promotion  of  the  use  of  energy  from  renewable  sources  (OJ  L  328,  21.12.2018,  p.  82)  (Renewable 
Energy Directive II).  
Preço de Venda ao Público (retail price). 
According to data from the latest fuel market bulletin published by Entidade Reguladora dos Serviços 
Energéticos. 

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EUR /litersProductDateCIFUnload and storageBiofuel incorporationGross marginPrice before taxesISPCO2CSRVATRetail selling price (PVP)31-01-220.6190.0060.1120.0710.8070.3330.0590.1110.3011.61228-02-220.6470.0060.1110.0940.8580.3330.0590.1110.3131.67528-03-220.9820.0060.0690.0991.1560.2960.0590.1110.3731.99525-04-220.9150.0060.0690.1101.0990.2960.0590.1110.3601.92630-05-220.9450.0060.1040.0611.1160.1680.0590.1110.3351.78931-01-220.5800.0060.1080.0870.7810.5070.0540.0870.3291.75828-02-220.6330.0060.1060.0960.8410.5070.0540.0870.3431.83228-03-220.8100.0060.0660.1341.0160.4900.0540.0870.3792.02725-04-220.7800.0060.0750.1130.9740.4900.0540.0870.3691.97530-05-221.0120.0060.1040.0811.2030.3310.0540.0870.3842.055Gas oilUnleaded petrolTaxes 
 
                                                 
of  an  excise  duty  reduction,  to  check  if  fuel  sellers  pass  on  the  full  reduction  to  final 
consumers.  From  1  June  2022  onwards,  they  have  also  put  in  place  a  mechanism  to  limit 
commercial  margins,  following  a  proposal  of  the  regulator,  whenever  these  margins  exceed 
efficient levels or historic margins.  

Finally, the government is currently reducing excise duty9 in a flexible way, based on market 
behaviour and fuel prices. This may result in tax rates lower than the minima set at EU level. 
This  mechanism,  in  the  form  of  ‘yo-yo  rates’,  substantially  aims  to  counter  fluctuations  in 
consumer prices10.  

Additionally,  in  that  context,  gross  margins,  in  particular  on  gas  oil,  are  falling  short 
considering the Directive’s minimum levels of taxation.  

In light of the foregoing, the Portuguese authorities consider that because of the current socio-
economic  circumstances,  the  system  provided  for  in  Article  19  of  the  Directive  must  be 
applied to allow tax reductions below the minima stipulated in the Directive. 

If, for example (based on price trends observed so far), prices (before taxes) increase by 35% 
for gas oil and by 50% for unleaded petrol, using the above-mentioned flexible rate, Portugal 
would need to reduce the taxation level to  EUR 278/1 000 litres for gas  oil and EUR 357/1 
000  litres  for  unleaded  petrol.  This  would  fall  below  the  minimum  rates  laid  down  in  the 
Directive.  

Given the current level of uncertainty and the market variables, the Portuguese authorities are 
unable to estimate the prices for the next 6 months. Based on the previously mentioned price 
increase assumptions, they would reduce the tax rate for gas oil to EUR 270/1 000 litres and 
for  unleaded  petrol  to  EUR  350/1  000  litres.  Both  rates  would  fall  below  the  minima  laid 
down in Article 7 of the Directive and Table A of Annex I to the Directive,   of EUR 330/1 
000 litres and EUR 359/1 000 litres respectively.   

The table below shows the estimations provided by the Portuguese authorities. 

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Referred  to  in  the  table  above  as  ISP  (Imposto  sobre  os  Produtos  Petrolíferos),  CO2  and  CSR 
(Contribuição de Serviço Rodoviàrio). 
The  weekly  revision  of  excise  duties  consists  of  a  reduction  by  an  amount  deemed  equivalent  to  a 
theoretical reduction of the  rate of value added tax (VAT) on road fuel from 23% (normal rate) to 13% 
(higher  reduced  rate),  ultimately  returning  the  extraordinary  amount  of  VAT  collected  due  to  the 
increase of the market price of the concerned products.  

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Finally,  as  highlighted  by  the  Portuguese  authorities,  energy  products  will  not  be  taxed 
differently  depending  on  the  location  of  the  headquarters  or  the  nationality  of  either  the 
supplier or the consumer, and any consumer may have access to this type of products.  

The budget impact cannot be quantified at this stage, as it will depend on fuel prices.  

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Consistency with existing policy provisions in the policy area 

Article 19(1), first subparagraph of the Directive reads as follows:  

‘In addition  to  the provisions  set  out  in  the previous  Articles, in  particular in  Articles 5, 15 
and 17, the Council, acting unanimously on a proposal from the Commission, may authorise 
any  Member  State  to  introduce  further  exemptions  or  reductions  for  specific  policy 
considerations.’ 

By means of the requested tax reduction, which is to be applied for a limited period of time, 
the Portuguese authorities intend to mitigate the exceptionally high retail prices of fuels, and 
ultimately  reduce  the  social  and  economic  impacts  of  the  present  exceptional  geopolitical 
situation affecting both households and companies. 

The tax reduction would allow beneficiaries to be charged national excise duty rates that can 
fall below the EU minimum tax rates provided  for in  the Energy Taxation Directive.  In the 
present  exceptional  geopolitical  situation,  this  would  be  of  relevance  to  the  social  cohesion 
policy considerations. However, based on the above-mentioned mechanism, the reduction of 
the excise duty would depend on the relevant fuel prices. 

The  possibility  to  introduce  such  a  tax  reduction  can  be  envisaged  under  Article  19  of  the 
Directive  since  its  purpose  is  to  allow  Member  States  to  introduce  further  exemptions  or 
reductions for specific policy considerations.  

The  limited  period  of  validity  of  the  authorisation,  until  31  December  2022,  is  within  the 
maximum period allowed by Article 19(2) of the Energy Taxation Directive, laying down, for 
this type of measure, a maximum period of 6 years, with the possibility of renewal.  

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Hypothetical scenariosProductDateMonthly variationPrice before taxesISPCO2CSRVATPVPVAT rateFixed fiscal burden30-06-2235%1.5060.1220.0540.0870.4072.17623%0.670Gas oil31-07-22-10%1.3560.1210.0590.1110.3792.02623%0.848Unleaded petrol31-08-22-10%1.2200.1460.0590.1110.3531.89030-09-22-10%1.0980.1690.0590.1110.3311.76831-10-22-10%0.9880.1900.0590.1110.3101.65830-06-2250%1.8040.2100.0540.0870.4962.65231-07-22-10%1.6240.2440.0540.0870.4622.47131-08-22-10%1.4610.2740.0540.0870.4322.30930-09-22-10%1.3150.3020.0540.0870.4042.16331-10-22-10%1.1840.3260.0540.0870.3802.031Gas oilUnleaded petrol 
However, the derogation should not undermine the future adoption by the Council of a legal 
act based on a Commission proposal for amendment of the Energy Taxation Directive11.  

State aid rules 

The  temporary  tax  reduction  envisaged  by  the  Portuguese  authorities  can  fall  below  the 
minimum levels of taxation as laid down in Article 7 of the Directive and Table A of Annex I 
to the Directive.  

The present proposal is without prejudice to any assessment of the Portuguese measure under 
State aid rules. Moreover, the proposal for a Council implementing decision does not prejudge 
the Member State’s obligation to ensure compliance with State aid rules. 

• 

Consistency with other Union policies 

Each  request  for  derogation  under  Article  19  of  the  Energy  Taxation  Directive  must  be 
examined  by  the  Commission  taking  into  account  the  proper  functioning  of  the  internal 
market, the need to ensure fair competition and EU health, environment, energy and transport 
policies. 

According to the Portuguese authorities, the envisaged tax reduction should partially alleviate 
the social and economic burden of the Portuguese population due to the recent price increase 
resulting  also  from  the  conflict  in  Ukraine.  Indeed,  the  particular  geopolitical  situation, 
coupled with a high market price of crude oil, which is likely to further rise in the upcoming 
months, translates into higher costs for the Portuguese households and businesses. 

As  a  result  of  this  exceptional  situation,  the  requested  temporary  measure  is  not  likely  to 
affect  intra-EU trade. Given its  limited effects  and limited duration, the measure should not 
distort competition or hinder the functioning of the internal market. 
As underlined in the RePowerEU Communication12, while focusing on vulnerable households 
and  businesses,  the  Commission  invites  Member  States  to  adopt  measures  incentivising 
energy  savings  and  reducing  fossil  fuels  consumption.  Nonetheless,  given  its  short  duration 
and the current exceptional circumstances linked to the geopolitical situation coupled with an 
exceptionally  high  market  price  of  oil,  the  requested  derogation  seems  adequate  and 
proportionate.  The  measure  takes  account  also  of  the  need  to  balance  the  specific  policy 
objectives  listed  in  Article  19  of  the  Energy  Taxation  Directive,  and  notably  the  EU’s 
environmental  policy,  with  the  imperative  emergency  to  ensure  energy  affordability  for 
businesses and households.  

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LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

Article 19 of Council Directive 2003/96/EC. 

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Proposal for a Council directive restructuring the Union framework for the taxation of energy products 
and electricity (recast), 14.7.2021, 563 final 2021/0213 (CNS). 
Communication from the Commission to the European Parliament, the European Council, the Council, 
the European Economic  and Social Committee and the Committee of the Regions REPowerEU: Joint 
European  Action  for  more  affordable,  secure  and  sustainable  energy  (COM(2022)  108  final,  
8.3.2022). 

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Subsidiarity (for non-exclusive competence)  

The field of indirect taxation covered by Article 113 TFEU is not in itself within the exclusive 
competence of the European Union within the meaning of Article 3 TFEU. 

However,  pursuant  to  Article  19  of  Directive  2003/96/EC,  the  Council  has  been  granted  an 
exclusive competence, as a matter of secondary law, to authorise a Member State to introduce 
further exemptions or reductions within the meaning of that provision. Member States cannot 
therefore substitute themselves for the Council. As a result, the principle of subsidiarity is not 
applicable  to  the  present  implementing  decision.  In  any  event,  since  this  act  is  not  a  draft 
legislative act, it should not be transmitted to national parliaments pursuant to Protocol No 2 
to the Treaties for review of compliance with the subsidiarity principle. 

• 

Proportionality 

The proposal respects the principle of proportionality. The tax reductions do not exceed what 
is necessary to attain the objective in question.  

The requested authorisation is for a limited period of time, until 31 December 2022.  

• 

Choice of the instrument 

The  instrument  proposed  is  a  Council  implementing  decision.  Article  19  of  Directive 
2003/96/EC makes provision for this type of measure only. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EVALUATIONS, 

POST 

OF 

EX 

STAKEHOLDER 

Ex post evaluations/fitness checks of existing legislation 

The measure does not require the evaluation of existing legislation. 

• 

Stakeholder consultations 

This proposal is based on a request made by Portugal and concerns this Member State only. 

• 

Collection and use of expertise 

There was no need for external expertise. 

• 

Impact assessment 

This proposal concerns an authorisation for an individual Member State upon its own request 
and does not require an impact assessment. 

• 

Regulatory fitness and simplification 

The measure does not  provide for any simplification.  It is the result of the request made by 
Portugal and concerns this Member State only. 

• 

Fundamental rights 

The measure has no bearing on fundamental rights. 

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4. 

BUDGETARY IMPLICATIONS 

The measure does not impose any financial or administrative burden on the European Union. 
The proposal therefore has no impact on the budget of the Union. 

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OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

An  implementation  plan  is  not  necessary.  This  proposal  concerns  an  authorisation  for  a  tax 
reduction  for  an  individual  Member  State  upon  its  own  request.  It  is  provided  for  a  limited 
period of time. The applicable tax rates can fall below the minimum levels of taxation set by 
the  Energy  Taxation  Directive.  The  measure  can  be  evaluated  in  case  of  a  request  for  a 
renewal after the validity period has expired. 

• 

Explanatory documents (for directives) 

The proposal does not require explanatory documents on the transposition. 

• 

Detailed explanation of the specific provisions of the proposal 

Article 1 stipulates that Portugal will be allowed to apply reduced taxation rates to gas oil and 
unleaded petrol used as motor fuels, below the minimum levels of taxation. 

Article  2  stipulates  that  the  authorisation  requested  is  granted  until  31  December  2022,  as 
requested by Portugal, within the maximum period of 6 years allowed by the Directive. 

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2022/0251 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

authorising Portugal to apply reduced rates of excise duty to gas oil and unleaded petrol 
used as motor fuels, in accordance with Article 19 of Directive 2003/96/EC 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Directive  2003/96/EC  of  27  October  2003  restructuring  the 
Community framework for the taxation of energy products and electricity1, and in particular 
Article 19 thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

By letter dated 2 May 2022, Portugal requested authorisation to apply reduced rates of 
excise duty to gas oil and unleaded petrol used as motor fuels pursuant to Article 19 of 
Directive 2003/96/EC, which can fall below the minimum levels of taxation  referred 
to in Article 7 of that Directive. Additional information and clarifications in support of 
the  request  were  provided  by  the  Portuguese  authorities  on  11  and  23  May  2022,  as 
well as on 8 June 2022. The authorisation was requested to apply until 31 December 
2022. 

According to the Portuguese authorities, the application of a reduced tax rate aims at 
mitigating the social and economic impacts of high retail prices of fuels resulting from 
the geopolitical situation, and directly affecting both households and companies. This 
measure aims to meet the daily needs associated with the consumption of motor fuels, 
by contributing to reduce the impact of the increase of retail prices. 

The  requested  authorisation  is  not  likely  to  distort  competition  or  hinder  the  proper 
functioning  of  the  internal  market.  Given  its  short  duration  and  the  exceptional 
circumstances  linked to the geopolitical  situation coupled with  an exceptionally high 
market prices of crude oil, the requested authorisation is considered to be adequate and 
proportionate. The authorisation balances the specific policy objectives  referred to in 
Article 19(1) of Directive 2003/96/EC, and notably the Union’s environmental policy, 
with  the  imperative  emergency  to  ensure  energy  affordability  for  businesses  and 
households. The tax reduction would partially offset the increased energy costs and is 
not cumulative with any other type of tax reductions. 

Portugal should therefore be authorised to apply reduced rates of excise duty to gas oil 
and unleaded petrol used as motor fuels, as requested. 

Pursuant  to  Article  19(2)  of  Directive  2003/96/EC,  each  authorisation  granted  under 
that  provision  is  to  be  strictly  limited  in  time.  However,  in  order  not  to  undermine 
future  general  developments  of  the  existing  legal  framework,  it  is  appropriate  to 
provide  that,  should  the  Council,  acting  on  the  basis  of  Article  113  or  any  other 

1 

OJ L 283, 31.10.2003, p. 51. 

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relevant provision of the Treaty on the Functioning of the European Union, introduce a 
modified general  system for the taxation of  energy products  and electricity  to  which 
this authorisation would not be adapted, this authorisation should cease to apply on the 
day on which those general rules become applicable.  

(6) 

This  Decision  is  without  prejudice  to  the  application  of  Union  rules  regarding  State 
aid, 

HAS ADOPTED THIS DECISION:  

Portugal is authorised to apply reduced rates of excise duty to gas oil and unleaded petrol used 
as  motor  fuels,  below  the  relevant  minimum  levels  of  taxation  referred  to  in  Article  7  of 
Directive 2003/96/EC. 

Article 1 

This Decision shall apply until 31 December 2022. 

Article 2 

However,  should  the  Council,  acting  on  the  basis  of  Article  113  or  any  other  relevant 
provision  of  the  Treaty  on  the  Functioning  of  the  European  Union,  introduce  a  modified 
general system for the taxation of energy products and electricity to which the authorisation 
granted in Article 1 of this Decision would not be adapted, this Decision shall expire on the 
day on which those general rules become applicable. 

This Decision is addressed to the Portuguese Republic. 

Done at Brussels, 

Article 3 

For the Council 
The President 

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