Government must refund VAT on registration tax – EC
The European Commission has confirmed that government must reimburse the amount paid in VAT on registration tax for cars to those who bought a car from May 2004 onwards.
European Commissioner for Taxation Laszlo Kovacs was answering a question in the European Parliament tabled by Labour MEP Louis Grech.
Kovacs said the Commission is pursuing the infringement procedure against Malta considering the inclusion of the registration tax in the taxable amount of VAT and that it had recently received the information about the amendment of the law which deals with this matter.
“Concerning the reimbursement claims, the Commission considers that taxpayers as mentioned in the question, might indeed seek redress of taxes that have been collected in breach of EC law. They must, however, exercise that right in accordance with the procedures provided for similar refunds in national law, as at the present, there is no common or harmonised set of substantive or procedural Community rules governing remedies for the enforcement of Community law,” Kovacs said.
The Commissioner said that it will have to be the national courts to apply domestic rules, which must ensure that the taxes levied in breach of Community law are reimbursed. A European Court of Justice ruling says that detailed rules on reimbursement must not be not less favourable than those governing similar domestic actions, and that they are also effective.
“At the present stage, the Commission does not have information demonstrating that the Maltese system of remedies does not comply with the standards established by the Court and thus, at the moment, does not intend taking any action in this respect,” Kovacs said.
In a statement issued yesterday, Grech said that whoever paid VAT on the registration tax of a car was entitled to seek reimbursement from the government.
In October 2007 Joseph Muscat and Grech lodged a complaint with Commissioner Kovacs that the Maltese authorities were unjustifiably levying VAT on the vehicle registration tax element.
“We maintained that this illegality by the Maltese Government was not in conformity with the ruling given by the European Court of Justice in the De Danske Bilimporter case (C‑98/05) and insisted that consumers who had been made to pay this unjustified tax should be refunded the relevant amount immediately,” Grech said.
In the recent budget speech the government announced that with effect from 1 January 2009 the VAT on vehicle registration would be abolished.
“Having said that and following a number of meetings I held in the past three months with the Commissioner for Taxation, I was given to understand by the Commissioner’s office that the government has no other option but to effect the relevant tax refunds under conditions not worse than those normally applied by national tax authorities,” Grech said.