More on car registration tax

Julian Zammit writes: "My question is regarding cars and registration tax.  I read an article of yours on the subject a while ago in The Times but it did not really answer my questions, which are:

"Why is it not possible for me to buy and register a car in any other EU member state and then drive it in Malta indefinitely with foreign number plates (without having to leave the island every three months or pay tax after six months)?  Do the EU laws on freedom of movement not apply to cars in Malta?

"Is this situation specific to Malta? Can an Italian residing in Italy buy a UK-registered car and use it in Italy indefinitely?"

"If I hold a British passport, then why can I not drive my British car in Malta indefinitely without registering it over here?"

"Are there any plans by the EU or Maltese government to change such laws so that I will be able to drive a car registered anywhere in Europe in Malta and if so when are these planned to be amended?"

"I recently went to sell my car but was told to wait before buying a new one as the EU is planning some changes to the system, which would allow me to buy a car from other EU member states at a much cheaper price. Is there any truth in this rumour?"

This is not the first time that this issue has been raised in Malta and even in other EU countries. Ultimately, the question boils down to whether the car registration tax regime is compatible with EU law on freedom of movement.

The European Commission has often faced this question - but its reply has been clear, if not music to readers' ears.

The Commission holds that there is no incompatibility.

And there is very little that I can add to this.

There is no doubt that in Malta the car tax regime imposes very high rates of tax that, in itself, often discourages people from buying a car in the first place or even from importing one on a personal basis.

However, the tax in itself does not prevent you from buying a car abroad and from bringing it into Malta. It "merely" makes it more expensive for you to do so.

So, as such, there is no breach of the principle of free movement.

It is possible for you to buy a car and bring it into Malta. The fact that you need to register it in Malta, pay the applicable tax dues and take the Maltese number plates does not mean that you cannot exercise your rights. Nor that EU laws on freedom of movement do not apply in Malta.

Nor is the situation specific to Malta.

The situation is the same in all countries that apply a car registration tax regime - 16 out of 25 EU member states do so.

So an Italian resident buying a UK-registered car would also need to register the car in Italy and pay the applicable registration tax there. On the other hand, the UK does not have a car registration tax, although the UK is still one of the most expensive places to buy a car.

The question of double taxation has also arisen, namely why should you pay car registration tax a second time if you have already done so in the first country. However, despite ending up in the European Court of Justice, this issue has not yet been sorted out.

If you hold a British passport the situation would not change. The point is whether you are resident in Malta or not, not whether you are a Maltese or a British national. If you hold a British passport and want to bring your car into Malta for residence purposes, then you would still need to register the car and pay the applicable duties.

The only exception to this would be those foreign nationals who have benefited from special tax regimes in Malta, such as the permanent resident scheme.

But in principle, non-Maltese persons who reside in Malta must also register their car and pay the applicable tax. Just like the rest of us.

As to whether the Maltese government has any plans to make changes, this would be a budget issue of which I am not at all privy. However, one has to appreciate that this is an important source of revenue for the Treasury and quite, frankly, I do not see any changes coming in the near future. But, of course, that is not my remit.

As to changes in the EU, yes, there are some changes in the pipeline. I will explain them in my column next week.

Readers who would like to raise issues or ask Dr Busuttil a question are invited to send an e- mail to contact@simonbusuttil.com, making reference to this column.