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Malta To Settle VAT Claims For Old Car Tax Regime

by Jason Gorringe, Tax-News.com, London

23 October 2015


The Maltese Government has said that it will, next year, settle historic VAT refunds for persons who registered a vehicle in 2004 and will cut the VAT rate on sports activities.

Earlier, Transport Malta had announced that the Government will be refunding the full amount of VAT paid on the registration tax to vehicle owners who had a vehicle registered between May 1 and December 31, 2004. The amount reimbursed will be less the grant paid in 2014 to all vehicle owners who were eligible.

The payments are aimed at settling a dispute between taxpayers and the island's tax authority concerning the payment of VAT and registration duty under Malta's now-revoked illegitimate registration duty regime, which was replaced on January 1, 2009.

Malta's previous registration duty regime was found to contravene EU law. Under this regime, registration duty was included in the taxable base for the calculation of VAT. All cars were subject to a registration tax based on the vehicle's engine capacity. The rate applied to the vehicle's value, which was determined by Maltese authorities. However, unlike under the regime for new motor vehicles, there was a minimum amount of registration tax that had to be paid for used cars. Even if the application of the corresponding tax rate to the taxable value resulted in a smaller amount of tax liability the taxpayer would be required to pay this (larger) minimum amount.

The regime meant that imported cars impacted by the minimum registration tax requirement were placed at a disadvantage to second-hand cars already available on the local market that had depreciated to the extent that the value of the residual registration tax (included in the car's market value) had fallen below the minimum payable registration tax amount.

In addition, the Budget announces that fees for sporting activities will attract a seven percent VAT rate from next year, down from 18 percent currently. This reduced rate will cover such services as gym memberships and the use of other sports facilities.

TAGS: tax | value added tax (VAT) | Malta | law | tax authority | VAT refunds

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