Ask your MEP

Jurgen Sixt writes:

I am a German pensioner living in Malta as temporary resident since 2002, although I am still primarily resident in Germany. In October 2003 I brought my second hand car to Malta, a 1989 model Honda Civic, and I am still driving with the German plate. A year ago I wanted to register this car in Malta. I was told at the Licensing Department to pay the minimum amount of Lm2,200 for registration. I objected to this enormous amount as I bought this second hand car in Germany in 1994 for Lm2,600 and the car is now worth a maximum of about Lm400. It is also left hand drive!

Are there new considerations in the pipeline which might lead to a much lower registration tax?

The car registration tax system is not, in itself, incompatible with EU law. I have made this point on several occasions in this column. However, the system must be applied in a way that does not infringe EU rules, notably the rules on non-discrimination, that is, that an EU country cannot treat other EU citizens in a less favourable manner than its own citizens.

On payment of taxation when a person moves residence within the EU, the European Court of Justice (ECJ) ruled that a 1983 EU law which exempts personal property imported permanently from another member state by private individuals from the payment of consumption taxes does not apply in the case of importation of one's car. This means that when a person moves residence from one EU country to another and takes along the car, the vehicle is normally subject to taxation, typically car registration tax in the new country of residence. This should be clear.

However, there still remains an important consideration which also derives from EU law and which has also been affirmed by the court.

This is that there should be no discrimination in the imposition of such a tax between a citizen transferring residence and others already resident in a given country. In other words if, say, a German citizen moves to Malta and brings his car, as in this case, he must not be asked to pay more tax than would have been paid by a Maltese citizen already resident in Malta.

One must therefore establish whether the reader in this case is being placed in a less favourable situation than that of others who are already permanently resident here. If there is a difference in treatment this difference must be justified by objective considerations. Otherwise it would be deemed illegal.

More specifically, the European Court of Justice has insisted that it is illegal for a member state to discriminate between imported and similar domestic products when imposing taxes.

In the particular case of car registration taxes, the European Court has pointed out that the tax imposed on used cars coming from another EU country must not exceed the amount of registration tax incorporated in the value of a similar used car already registered in the country of destination (in this case, Malta). This means that it is illegal for a system of car registration taxes to impose on imported cars, such as in this case, taxes that are higher than the residual tax incorporated in the value of a similar used car already registered here.

Now if you are being asked to pay a "minimum" of Lm2,200 on a car that is worth just Lm400, then there can be little doubt that this tax bill is higher, significantly higher, than the residual tax incorporated in the value of a similar used car already registered in Malta.

The key case to refer to on this point is known as the "Weigel case" (Case C-387/01) decided in April 2004. Here, the court held that it is contrary to EU law "to charge tax on imported used motor vehicles based on a value which is higher than the real value of the vehicle with the result that they are taxed more heavily than similar used cars on the domestic market. It is therefore necessary, in taxing imported used cars, to take account of their actual depreciation".

And it added that "to avoid discriminatory taxation, the taxable value imputed to the imported used vehicle by the revenue authorities should faithfully reflect the value of a similar used vehicle already registered on the domestic market."

So case-law establishes that, while member states are free to impose their own car registration tax system, the overriding importance of non-discrimination in the application of such a system must prevail.

Malta is required to follow the case-law of the European Court of Justice and, therefore, the reader should raise this point with the Licensing Department accordingly.

Readers wanting to raise issues or ask questions can send an e-mail to contact@simonbusuttil.com or visit www.simonbusuttil.eu