If you've bought a car over the past few years you can claim a refund of the VAT levied "illegally" on the registration of the vehicle, according to the European Commission.
According to the Commission, car owners who bought new or second-hand cars since Malta's accession and paid VAT over and above the normal registration tax may claim a refund as the tax was charged against EU laws. This could mean the government would have to fork out hundreds of thousands of euros in refunds.
However, Commission sources cautioned this is not a simple straightforward exercise because the affected taxpayers will first have to file a court case and prove they had in fact paid the "illegal" tax and, in order to demand the refund, the court has first to rule in their favour.
Another stumbling block is that, according to Maltese law, claims for tax refunds can only be made within two years from when the payment is made. This means that all those who have not yet instituted a court case or paid the tax before February 2006 will probably not be entitled to a refund. However, the sources said this has to be decided by the Maltese courts.
The Commission's position was announced by EU Taxation Commissioner Laszlo Kovaks in reply to a parliamentary question by Labour MEP Louis Grech, who asked whether Maltese taxpayers were entitled to refunds on the VAT they paid on vehicle registration.
Mr Kovacs confirmed that Maltese taxpayers could seek redress over taxes collected in breach of EU Law. However, he made it clear this was not automatic and had to be decided by national courts.
"Taxpayers must exercise their right in accordance with the procedures provided for similar refunds in national law as at present there is no common or harmonised set of substantive or procedural community rules governing remedies for the enforcement of Community law," Mr Kovacs said.
"It is for the national courts to apply domestic rules, which must ensure the taxes levied in breach of EU law are reimbursed."
Mr Kovacs said Brussels had no intention of opening infringement procedures against Malta over the issue of refunds.
"The Commission does not have information demonstrating that the Maltese system of remedies does not comply with the standards established by the (European) court," he said.
The government last night denied comments made by Labour which said that the Commission had confirmed the government would have to refund the VAT it had charged on registration tax.
The government said the Commission only said that those taxpayers who felt they should get a refund must first take their case to the Maltese courts.
The government also denied that the VAT law with regard to vehicle registration infringed EU rules, pointing out that the matter was never decided by the European Court of Justice in this regard.
In fact, the government consistently opposed the view that the previous regime breached EU law. The government had maintained that it changed the registration tax in the last budget because it planned to and not because it was forced by the Commission, adding however, that the EU's concerns were taken into account in the revision.
Still, the issue of charging VAT over and above the normal vehicle registration tax has been a subject of dispute between Malta and the EU for the past years. Whatever the reasons, the changes followed pressure from Brussels which could have translated itself into further legal procedures and a case before the European Court.
The new car registration system does not charge VAT. However, government never made any mention of refunds. In fact, despite the recent changes, the pending legal procedures against Malta have been kept open as the new system has not yet been officially cleared by Brussels.
According to Brussels, the Commission is still examining the changes introduced by the government. It is only at the end of this exercise that the Commission will decide whether to close infringement procedures against Malta on the tax charged.
The matter was first raised in 2007 by Opposition Leader Joseph Muscat, then an MEP, together with his colleague, Mr Grech.
Labour yesterday quoted Mr Grech saying that in meetings on the matter over the past months Mr Kovaks had "given him reason to believe that the government had no alternative but to pay back the relevant tax".