When the price of petrol or diesel lights up at the pump, we naturally wonder what all that litre actually contains. Part of it is the fuel itself – that is, the cost of the crude oil, refinery processing, mandatory bio-ingredients, transport and margin. And a significant part is taxes: excise duty and VAT.
In this article we explain how the price of fuel is composed, what the current excise duty rates are, how VAT works and when companies can claim a VAT deduction on fuel.
The final pump price is the sum of the following parts:
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Excise duty on petrol and diesel is fixed per litre regardless of the market price. So in practice, even if the world oil price falls, the excise duty per litre remains the same. In the Czech Republic, after the end of the temporary relief for diesel in 2023, the rates have stabilised at CZK 12.84 per litre for petrol and CZK 9.95 per litre for diesel.
For LPG and CNG, the burden is much lower, which is a deliberate policy to encourage alternative fuels. The European minimum for these products is also lower than for liquid fuels.
For illustrative purposes, we use the current average prices for the Czech Republic as of 20 October 2025:
petrol (Natural 95) 34.37 CZK/l, diesel 33.28 CZK/l.
These figures show that taxes account for around half of the price of petrol (the sum of excise duty and VAT recalculated from the final price).
Diesel has a lower excise duty than petrol, so the tax share of the total price is slightly lower.
If you need to know the price of diesel without VAT, the procedure is always the same: divide the final price by 1.21 (21% VAT applies in 2025) to get the price without VAT. If you want to go further and differentiate between the price without VAT and the price without excise duty, deduct the fixed excise duty (9.95 CZK/l). In the same way, for petrol you deduct 12.84 CZK/l.
For VAT payers, fuel is a commodity charged at the standard rate of 21%, and VAT can be deducted if the fuel is used for economic activity (typically business vehicles). Good practice means a proper tax document (receipt/invoice with details), accounting and proof of connection with taxable transactions. If the vehicle is also used outside the economic activity or for exempt transactions without deduction, a proportional or reduced deduction is applied – i.e. not always 100%.
For non-VAT payers (typically tradesmen outside the VAT regime), VAT remains part of the cost. In terms of excise duty, there is no separate deduction – excise duty is included in the price of the fuel and is a final cost. However, there are special excise duty refunds for specific purposes (e.g. so-called green diesel in agriculture).
What are the obligations of VAT payers and non-payers and how do they differ? The next article will tell you.
Note to employers: the reference fuel prices for travel allowances (published for business travel purposes) are not the same as market prices at the pump – they are administrative averages for calculating allowances. These amounts are published annually by the state in conjunction with the labor rules.
LPG (liquefied petroleum gas) and CNG (compressed natural gas) are taxed significantly less than petrol or diesel.
The reason for the lower taxation of gases is the EU and Czech policy supporting alternative and lower-emission fuels.
Although the excise duty is fixed, the final price fluctuates according to other influences:
Excise duty on fuel can only be changed by the government by amending the law; VAT can be changed by changing tax rates. In 2025, the VAT rate for fuels remains unchanged (still 21% in the standard rate), with more significant tax changes this year elsewhere (e.g. alcohol). Thus, normal fluctuations in fuel prices in 2025 are due to market factors.
The fuel price is made up of three components: a variable base (fuel purchase, refining, biobased components, logistics and margin), a fixed excise duty and a VAT of 21% calculated on the base + excise duties. In 2025, the excise duty will be about 12.84 CZK/l for petrol and 9.95 CZK/l for diesel (LPG and CNG have significantly lower taxation). VAT payers can claim a deduction for fuels as long as they are used for economic activity and have the proper proof; excise duty is not deducted (exceptions exist only for special schemes such as “green diesel”).
Although the excise duty per litre is fixed, final prices fluctuate according to world oil and product prices, the exchange rate of the Crown, margins, bio-based ingredients and changes in supply; in 2025, VAT on fuels remains at 21% and there are no major tax changes on fuels. To quickly calculate the price without VAT, simply divide the final price by 1.21; for a base without any taxes, subtract the excise duty from this amount.
No. It’s fixed per unit. When oil becomes cheaper, VAT in crowns drops because it is calculated proportionally but excise per litre remains.
No. The deduction applies if you use the fuel for economic activity and you have a tax receipt. Excise duty is the final part of the price.
Because higher operating costs and higher margins are reflected in the tax-free base in a less competitive environment. Taxes are the same, it is the market part of the price that differs.
It doesn’t. The rate for petrol and diesel is fixed per 1 000 litres regardless of octane/ cetane; differences between E5/E10 are only reflected in the base purchase price.
Exactly not. Taxes and final price are known; the “base” includes both purchase price and logistics, as well as wholesale and retail margins, which change continuously.
Yes. Heating gas and vehicle gas are taxed under different rules.
Not sure how to do your taxes correctly so you don’t get it wrong? We can help you navigate the law, whether it’s dealing with a specific tax situation, preparing for an audit by the tax authority or defending yourself in court.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
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