The vehicle registration tax regime has been overhauled with the tax on new vehicles to be based on the value, CO2, particulate matter, age and length of the vehicle.

Imported second-hand cars will be taxed on market value.

VAT on registration tax is being abolished while a minimal tax on imports from the European Economic Zone and non-EU member states is being introduced. There will be extra weighting for diesel cars with particulate matter higher than 5.0mg/km.

Vehicles will be subject to an annual circulation tax based on emissions and age.

As far as present fleets go, the first part of the reform affecting M1, self-drive, garage-hire cars and motorcycles, will come into force with a revision of the annual circulation tax based on capacity and age.

Cars bought between January 1 and end of December may opt for the new system. Any registration tax refund will be credited against payment of the annual licence.

The new system favours smaller vehicles with low-level emissions and cleaner technologies as well as motorcycles.

The reform is based on the polluter-pays principle and on congestion created. It will be addressed in two phases: The first, to come into force on January 1, would include private vehicles for the carriage of passengers and motorcycles. Commercial vehicles would then follow. The price of second-hand vehicles will be determined by local market conditions.

The government will be appointing an Appeals Board to hear and decide on cases where owners do not agree with registration tax valuations. There would still be a minimum tax for vehicles manufactured within a five-year-period from the date of registration in Malta and which are not of EU or European Economic Area origin.

Congestion is also another important factor in the proposed new system. Longer cars increase congestion time and need bigger parking spaces. Therefore, smaller cars should be fiscally preferred and so the purchase of smaller vehicles will be rewarded.

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