Malta may have to change car registration tax system

A European Court of Justice ruling declaring as illegal the tax system adopted in Poland on second-hand cars imported from another EU member state may have an impact on a similar practice used in Malta.

Nationalist MEP Simon Busuttil, an expert in EU legal matters, said the judgment, handed down last week, has a significant impact on Malta's current tax regime, and the Maltese courts have no option but to follow it. The case brought before the Luxemburg court involved Maciej Brzezinski, a Polish citizen, who was seeking to recover the tax he had paid in 2004 on a 15-year-old Volkswagen Golf he imported from Germany. The court ruled that Poland cannot tax second-hand cars from other EU countries "more onerously" than those already registered in Poland. The court said that the Polish excise registration system on second-hand cars is incompatible with EU law and that its ruling has a retroactive effect dating back to when Poland joined the EU in May 2004.

The situation in Malta on this question is very similar to Poland's and, thus, the European Court of Justice's judgment may lead Maltese citizens to lodge similar complaints.

Car registration tax imposed in Malta treats second-hand cars differently to new cars in the sense that, apart from the tax rate as a percentage of value of the car, it also imposes a minimum rate of tax payable regardless of the value of the second-hand car.

This may result in a situation where the tax payable on a newly-registered second-hand car in Malta could be higher than the tax component incorporated in a similar car already registered in Malta. This would constitute a breach of EU law, according to last week's judgement.

"This case will have significant implications for Malta because we may have to revise our car registration tax on second-hand cars purchased from other EU countries. It also means the authorities may face several claims for reimbursement of any undue tax collected in breach of this judgment since May 2004," Dr Busuttil told The Times.

He said he was not surprised at this judgment because the European Court has already been making steady inroads on car registration tax over recent years, most notably with regard to second-hand cars.