Romania's Registration Tax On Euro 4 Cars To Turn Buyers To Second-Hand Car Market

"We will most likely witness a turn to the second-hand car market of the clients who once wanted new cars at affordable prices," Milea said after the inauguration of an auto complex in Bucharest.

The normative act through which the registration tax for Euro 4 cars was suspended cannot be renewed, so after the expiration of the norm, owners of Euro 4 cars will ahve to pay the registration tax.

"I have held intense talks with the European Commission and we cannot extend the suspension of the registration tax on Euro 4 cars, thus, starting December 15 (…) the tax will be paid," said Tuesday interim Environment Minister Elena Udrea.

Udrea added, in her first press conference as interim environment minister, that she does not intend to amend the current car tax legislation.

In June, the European Commission sent Romania a letter of formal notice regarding the registration tax for cars, the first stage in the procedure for violations of community law, demanding the amendment of relevant legislation and adding the current system creates discrimination.

"The Commission is of the opinion that the provisions of the Romanian legislation, according to which the application of the pollution tax for certain motor vehicles is suspended while it is increased for certain used cars coming from other Member States, might discriminate against used cars brought from other Member States and protect the domestic new car industry," the European Commission wrote.

According to the Romanian legislation entered into force in February 2009, cars pertaining to the EURO 4 category and with a cylinder capacity of less or equal to 2,000 cmc are exempt from pollution tax in Romania if registered for the first time anywhere within the EU during the period from 15 December 2008 to 31 December 2009.

Following the changes in the Romanian legislation, the Commission received a very large number of complaints. By issuing this press release the Commission informs the public on the outcome of its investigation of the Romanian legislation.

The Commission supports policy measures aimed at favouring less polluting cars. However, the Commission, as Guardian of the Treaty, must ensure that they are compatible with the EU law. In this respect, the way in which the Romanian legislation is constructed seems to have a protective effect for domestic industry of new cars.

According to consistent ECJ case-law of the European Court of Justice, Member States can impose differential taxation on similar products provided that it is based on objective criteria and does not lead to any protection of domestic production. In the Commission's opinion, the criterion of "the first time registration" is not a completely objective requirement as it does not take into account the inherent quality of cars. It could, in certain specific cases, lead to discrimination against second-hand cars coming from other Member States.

Indeed, following the application of the "the first time registration" requirement, all new cars registered during the period fixed by the Romanian legislation and which instantly join the Romanian market of used cars, circulate tax free. On the contrary, cars of an equivalent quality, which are going to be registered in Romania during the same period although not for the first time and which are in direct competition with the domestic goods, will be subject to a substantial tax burden.

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