Drivers travelling to Spain may see the cost advantage of refuelling begin to shrink after the Spanish government restored VAT on fuels to the standard rate of 21 percent from 1 July, ending a temporary tax reduction introduced earlier this year.

The reduced VAT rate of 10 percent had been in place since March as part of a broader package of measures aimed at easing the impact of rising energy costs.

The government has now begun to withdraw some of those extraordinary measures and return to the country’s standard tax framework.

Fuel discounts continue

Despite the return to the full VAT rate, motorists will continue to benefit from temporary fuel discounts over the coming months.

The discount will be set at 15 cents per litre in July, falling to 10 cents per litre in August and five cents per litre in September as the support is gradually phased out.

Additional support measures for agricultural diesel and the road freight transport sector will also remain in place to help limit the impact on key industries.

Impact on cross-border drivers

The changes are expected to influence fuel prices across Spain and could reduce the price advantage that has encouraged many Portuguese drivers, particularly those living near the border, to refuel across the frontier.

However, the remaining discounts mean that Spanish fuel may still offer savings in some areas, depending on local pump prices.

Fuel prices will be closely watched

The coming weeks are expected to provide a clearer indication of how the changes affect cross-border refuelling habits and whether the gap between fuel prices in Spain and Portugal narrows as the temporary support measures are withdrawn.

While the return to the standard VAT rate is likely to reduce some of Spain’s price advantage, the remaining fuel discounts and fluctuations in wholesale fuel costs mean prices will continue to vary.

For motorists on both sides of the border, whether it remains worthwhile to fill up in Spain will ultimately depend on local pump prices as the new measures take effect.