The registration tax for commercial and heavy vehicles will be reformed, abolishing the tax for those which reached European emissions' standards.

This reform follows on the one announced during the 2009 Budget when the registration tax for light vehicles was announced. This had given incentives for those with the least emissions and also according to length.

The new registration tax for commercial vehicles will reward whoever pollutes less. The registration tax will consider the vehicle euro-standard, which is the benchmark applied in other EU countries in terms of emissions.

Finance Minister Tonio Fenech explained the new system will promote Euro 4 and Euro 5 commercial vehicles regarded as those which least pollute - these will have no registration tax.

On the other hand, commercial vehicles with a Euro 3 or lower will pay a registration tax based on their weight rather than the value. He said there could be instances where the registration tax on vehicles of this category would be allowed a two-year transition period where they can continue being sold under the old regime.

Vehicles manufactured before 2001 fall within the Euro 2 standard, those manufactured between 2001 and 2005 reach the Euro 3 standard, while those manufactured after 2006 reach Euro 4 standards and better.

Meanwhile, agricultural tractors carry no registration tax, just as vehicles used in enclosed areas such as docks, airports or seaports. New ambulances carry no registration tax while used ones carry a tax of 21 per cent.

New or used racing cars, go-karts, quad bikes and motorcycles not suitable to be used on the road carry a registration tax of 6.5 per cent. Caravans and motor homes will be taxed at 50 per cent, while new hearses will be taxed at 30 per cent.

The annual road licences for those with Euro 4 and Euro 5 standards will decrease for the first nine years since their first registration while those with a lower standard will increase.

So as to mitigate the effect of this change, vehicles registered by the end of 2009 shall have a four-year transition period before the new licence rates become applicable.

This transition period, plus the lack of a registration tax on Euro 4 and Euro 5 commercial vehicles, is intended to serve as an incentive for owners to renew their fleet of heavy vehicles.