The Commission and the German government have agreed a solution that will uphold the right of European citizens not to be discriminated against on the basis of their nationality, the Commission said.
Germany's original plan would have only charged non-German drivers, with German drivers' costs covered by road taxes. The Commission said this was discriminatory and launched an "infringement procedure" in 2015. This is now on hold, it said, and will be closed when the new law is adopted.
Under the new scheme drivers will buy pre-paid stickers, or "vignettes", based on the amount of time they plan to spend driving in the country and the fuel-efficiency of their cars.
The annual charge will be capped at €130.
German Federal Minister of Transport and Digital Infrastructure Alexander Dobrindt said: "The toll charge makes sense and is fair and just. It ensures that all drivers contribute adequately to the financing of our motorways. With infrastructure charges, we will strengthen the user pays principle and facilitate the transition from infrastructure financing through taxes to financing through road charges."
"This is an important signal for Europe as a whole. Germany welcomes the European Commission's objective to create a single European legal framework for a single European road charging system to reinforce the user pays principle for passenger vehicles in the medium term, and is willing to support the European Commission in its efforts to achieve this at the European level," he said.
Automotive expert Stephan Appt of Pinsent Masons, the law firm behind Out-Law.com said: "The key issue here was that the initial concept was discriminatory, as it provided for tax deductions for German car owners in return for the toll. Now it seems that linking the deduction to the eco friendliness of the car makes the difference as it is not per se equal to the toll fee but is linked to the eco aspect and comes in different classes of deductions."
"Another substantial criticism that was raised in this context is that the aggregate tolls that will be raised will probably not even cover the cost of implementing the toll with all the technology and administration/enforcement attached," Appt said.
The Netherlands and Austria may appeal against the agreement, Deutsche Welle has reported. Dutch transport minister Melanie Schultz van Haegen told Dutch news agency ANP that the Netherlands plans to file a lawsuit with the European Court of Justice, while Anton Heinzl a spokesman for Austria's Social Democrats (SPÖ) party said the country would be looking closely at the agreement, Deutsche Welle said.