Moving your car in the EU

Joseph Savona asks: I was wondering if you have any information regarding the freedom of movement of vehicles within the EU. In particular, how long can a vehicle, brought into Malta by an EU national, having number plates of that EU country, be allowed to remain in Malta? Also, once repatriated, how long does it have to remain outside Malta before it can be allowed to re-enter Malta? Is it correct that the only person who is allowed to drive the vehicle in Malta is the person who owns and brought it into Malta?

This depends on whether the person moving the car to another EU country intends to reside there or merely visit for a short while.

When EU nationals travel to another EU country for the purposes of a brief visit they are free to travel using their vehicle and, clearly, they are not obliged to pay any registration tax in the country they visit. The insurance coverage taken out in the country of origin is applicable also there, although not necessarily with the equivalent coverage.

In this case, therefore, the vehicle can remain in Malta, without paying registration tax, for a period of six months in a consecutive period of 12 months. Once the year has passed the persons concerned are obliged to take the vehicle out of the country or pay registration tax in Malta.

Note that the exemption from registration tax is lost if the car is used by a Maltese person instead of the EU national who brought it here.

Once the vehicle is taken outside Malta, there are no limits on how long the vehicle should remain out of the island before it can be brought back in.

The situation is different when an EU national decides to move his residence permanently to another EU member state.

A vehicle can be moved from one member state to another by any EU national who intends to set up his permanent residence in the host country. If, say, a UK national decides to set up his permanent residence here in Malta he is free to get his car along with him. However, he is obliged to pay the Maltese car registration tax. He may be precluded from using his car in Malta unless he pays the tax.

Recently, the European Court of Justice ruled that a 1983 EU law, exempting personal property imported permanently from another member state by private individuals from the payment of consumption taxes, is not applicable in the case of cars. Having said that, the over-riding principle remains that there should be no discrimination in the imposition of such a tax between such a citizen who is transferring his residence here and others who are already resident here. One has to see whether the new resident is placed in a less favourable situation than others who have been permanently resident here. If there is a difference in treatment this difference must be justified by objective considerations. If not, it is considered illegal.

Once registration tax is paid the person is free to allow any other person to drive it. But this is obviously subject to the insurance coverage that one has obtained whether in the country of origin or in Malta.

The European Commission recently launched a consultation for the public and business on reforming EU passenger car taxation systems. This is a follow-up to the Commission's communication on passenger car taxation that dates back to September 2002.

In this communication, the Commission recommended that registration taxes should be gradually phased out and that a new tax structure linked to carbon dioxide emissions should be introduced. In other words, rather than pay registration tax when we buy a car we would pay taxes along the years on the basis of our use of the car.

This option seems to have found favour with both industry and consumer associations. On the basis of the comments received from the public at large, the Commission is likely to issue a legislative proposal - possibly by the end of this year.

However, since this is a tax measure, it would require the unanimous consent of all EU countries, including Malta. Unanimous agreement is never easy to achieve with tax measures. So one should be realistic on how soon any such changes are likely to be introduced.

Readers who would like to raise issues or ask a question to Dr Busuttil are invited to send an e-mail, making reference to this column, to contact@simonbusuttil.com.