EU closes five-year case over car registration tax

Brussels yesterday gave its blessing to Malta’s new system of car registration tax, more than two years after the system was introduced and five years from the start of infringement procedures against the island.

“After a long examination of Malta’s legislation and further fine-tuning we have no further issues with Malta over any aspects of car registration taxes. Finally, the issue is closed,” a Commission official told The Times.

Asked why it had dragged on for so long, the official said the dossier in hand was highly technical and complicated and Malta was asked to make further amendments along the way to come in line with EU law.

The case, one of the most highly visible in Malta since EU accession due to the Maltese passion for cars, resulted in a total overhaul of car registration, lowering considerably the price of imported second hand cars into the island.

The main result has been a flood of low-mileage second-hand imports, mainly from the UK, to the detriment of local resellers of new cars who found themselves severely undercut by this new competition.

In 2006, following complaints on the issue registered by Maltese citizens, the Commission had asked Malta to overhaul the system as it considered it discriminatory with respect to motor vehicles coming in from other member states and highly lacking in transparency.

This led to the introduction of the new system in 2009, based on a new environment-friendly registration tax system, which takes into account emissions, length of the vehicle and the value of a car.

In a statement, the government yesterday said that according to the Commission, the new system is fully in line with EU legal principles as it takes the actual value of a vehicle fully into account at the moment of registration, applying depreciation in a transparent manner.

“The new registration tax system also informs the taxpayer and the general public of the criteria used for the determination of the taxable value of vehicles, providing the public with the opportunity to challenge the registration tax due when an individual disagrees with the authorities on the assessment of the value of used vehicles,” the statement said.

The government also noted that after the closure by the European Commission of the infringement related to the inclusion of the motor vehicles registration tax in the VAT base on in 2009, “there remain no outstanding infringements related to the taxation of vehicles in Malta”.

The matter, however, is also at the centre of a court case spearheaded by the Labour party, which is demanding compensation for thousands people who were made to pay the registration tax under the old regime between Malta’s accession into the EU in 2004 and the day the new system kicked in.