The toll, passed by the German parliament (Bundestag) last year, would charge both foreign and domestic drivers of German roadways up to €130 per year, but only German residents would get a rebate on their motor vehicle taxes in exchange.
This, the European Commission said on Thursday, unfairly discriminates against foreign drivers, including those from EU member states, therefore violating EU law.
"It is the Commission's duty – as Guardian of the Treaties – to ensure that such charges do not discriminate between domestic and foreign drivers in the EU," the Commission wrote in a statement.
Germany has two months to make reforms to the planned toll, or the Commission says it will bring the country to the European Court of Justice.
But German Transport Minister Alexander Dobrindt snapped back that the country was ready for a fight.
“We are armed and prepared for the confrontation with the Court of Justice,” Dobrindt said. “The sooner, the better.”
“In the past few months, I have more than clearly stated that I cannot accept stalling tactics.”
Germany had intended to implement the toll this year, but it has been put on hold given the opposition from Brussels.
Introducing the toll was a condition of the coalition agreement decided in 2013, and one of the key demands of the Christian Democratic Union (CSU), Bavarian sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU).
German Transport Minister Alexander Dobrindt - a CSU member - has said that the toll is “important, urgent and necessary” to raise an estimated €500 million for roadway infrastructure.
But Germany's EU neighbours have protested that it will have a huge impact on their own citizens who frequently travel through the Federal Republic by road.