Portugal fuel prices: ISP, VAT and Carbon Tax behind the cost at the pump

High fuel taxation on its own does not fully account for the price rises seen in the first months of this year. Even so, it remains one of the main reasons why Portugal consistently appears near the top of European Union rankings for fuel prices.

When you add together the Tax on Petroleum Products (ISP), various charges and Value Added Tax (VAT), the Portuguese state takes in roughly 60% of what motorists ultimately pay at the pump.

How taxes shape fuel prices in Portugal

Petrol and diesel: VAT, ISP and other charges (Apetro)

According to Apetro’s latest figures, petrol is subject to 23% VAT and an ISP charge of €0.526/l. On top of that, there is €0.087/l for the Road Service Contribution and €0.054/l for the Carbon Tax.

Diesel is also taxed at 23% VAT and carries an ISP charge of €0.343/l, plus €0.111/l for the Road Service Contribution and €0.059/l for the Carbon Tax.

Fuel	VAT	ISP	Road Service Contribution	Carbon Tax
Petrol	23%	€0.526/l	€0.087/l	€0.054/l
Diesel	23%	€0.343/l	€0.111/l	€0.059/l

Additional ISP surcharge created in 2016

On top of the amounts above, there is an extra ISP surcharge of €0.007/l for petrol and €0.0035/l for road diesel.

The Government brought in this extra charge in 2016. It was presented at the time as a temporary measure to respond to oil prices, which had fallen to historically low levels (and have since risen again…), and to recoup VAT revenue it was losing. What was supposed to be short-term ultimately became permanent, which is why the surcharge is still in place.

This additional fuel levy-paid by consumers each time they fill up their car-is allocated to the Permanent Forest Fund, up to a maximum limit of €30 million.

Carbon Tax continues to rise

Another charge that has been applied every time drivers stop at a filling station since 2015 is the Carbon Tax. It was introduced to support the “decarbonisation of the economy, encouraging the use of less polluting energy sources”.

Its value depends on the annual average price achieved at auctions of greenhouse-gas emission allowances, meaning it is set each year. In 2021, as noted above, it adds €0.054 per litre of petrol and €0.059 per litre of diesel.

Compared with 2020, the increase was minimal: just €0.01/l for both fuels. However, looking back one more year shows that the 2020 amounts doubled versus 2019, offering a clear indication of how this tax has been evolving in recent years.

When it first came into force in 2015, the rate was “only” €0.0126/l for both petrol and diesel. Now, six years on, it has more than quadrupled. And the outlook for 2022 is that it will rise again.