Judge orders refund of registration tax on imported second-hand vehicle

The judgment is expected to have consequences for government, who although was let off the hook by the European Commission in 2011 which closed infringement proceedings against Malta concerning registration tax on second hand vehicles from other Member States, still faces a long list of  similar cases which were filed in 2010 by the Labour Party and Alternattiva Demokratika.

According to the Labour Party, some 14,000 people had entered a claim for a refund since the party initiated a campaign which challenged government demanding a VAT refund on the vehicle registration tax they have paid after the country joined the EU on May 1, 2004.

Labour's campaign on VAT charged on second hand imported vehicles was launched after EU Commissioner Laszlo Kovacs had said that VAT should not have been charged on registration tax for vehicles bought after Malta joined the EU in 2004.

Last year however, the European Commission declared that "following a thorough analysis of the legal issues at stake in this case, and on the basis of all the information it had gathered, the Commission found that the registration tax applied in Malta is in line with EU law."

In his judgement today, Judge Anthony Ellul ruled that Transport Malta had to refund William and Anna Grech the difference they paid in Registration Tax and VAT on a Landrover Freelander they bought and imported from the UK in 2007 for the price of €3,693.

When the car was brought to Malta the Grech's were asked to pay €9,783 in Registration Tax and €1,761 in VAT.

The Grech's paid the money under protest, while reserving their right to seek legal redress claiming that  no EU member state should impose any additional  internal taxation of any kind which would be in excess of that imposed - directly or indirectly - on the same or similar products in any other member states.

While exempting the Prime Minister and the transport minister from any responsibility in the matter, the Court ruled that Transport Malta had valued the Landrover Freelander at Lm3,053, which should have amounted to Lm1,984 in VAT.

The Court explained that although the law in 2007 had established a minimum of  Lm4,200 as registration tax, this imposition was in breach of EU regulations and was later changed, but Transport Malta had failed to justify the imposition of VAT on registration tax over imported second hand cars from an EU member state.

Today's judgement has flug open the doors for similar refunds due to the amount of pending law suits instigated by the Labour Party, which some estimate to be at €50 million.

The Labour party had invited people who bought cars after May 1, 2004, to add their name to a suit which was to be funded by the party.

Finance Minister Tonio Fenech has reiterated that government was not in breach of EU laws, pointing out that the matter would have to be decided by the European Court of Justice, and accused Opposition leader Joseph Muscat of acting irresponsibly.

Government had said that the Labour Party was trying to force the government to pay out money which no judicial authority had ordered it to.

The consequence, government said, would be that new taxes would have to be imposed to make good for the €50 million shortfall the pay-out would leave in State finances.

Alternattiva Demokratika had also aligned itself with Labour's position and asked people wanting to challenge the government's position to write to the party.