The European Commission said today that it has decided to send to Malta a formal request to amend its car registration tax rules which discriminate against second-hand cars brought into Malta from other Member States. The request will be made even though the Maltese governemnt has already announced it will change the registration tax regime,

The EU request will take the form of a "reasoned opinion", the second stage of the infringement procedure laid down in Article 226 of the EC Treaty. If the Commission does not receive a satisfactory response from Malta within two months, it may ultimately bring the case before the Court of Justice.

"The European Court of Justice (ECJ) has consistently held that a Member State is not prohibited from levying registration taxes on second-hand imported cars provided that the tax is in conformity with Article 90 of the EC Treaty. This means that a Member State must not impose any internal taxation on products from other Member States in excess of that imposed on similar domestic products," the commission said in its statement.

The Court also decided that registration tax paid on a new vehicle forms a part of its market value and that Member States must take actual car's depreciation value into account when calculating registration tax.

The commission in its statement explained that the Maltese car registration tax system has a discriminatory effect with respect to motor vehicles coming from the other Member States. In Malta, the tax rate, which depends on the vehicle's engine capacity, is the same for new and used cars. The rate is applied on the vehicle's value, which is determined by the Maltese authorities. However, differently from new motor vehicles, there is a minimum amount of tax fixed only for used cars. Even if the application of the corresponding tax rate to the taxable value determined by the authorities results in a smaller amount than the fixed minimum, the latter prevails. The application of the minimum tax cannot guarantee that the tax applied on second-hand vehicles from other Member States will not exceed the residual tax incorporated in the value of similar vehicles already registered in Malta, as required by the ECJ.

An additional aspect is the lack of transparency of the administrative procedure which is used to determine the taxable value of motor vehicles.

The Commission further contests the lack of possibility for the taxpayer to challenge the correctness of the tax due where he believes that the assessed amount of the tax does not correctly reflect motor vehicle's actual depreciation.