The criminal proceedings against car dealer Christian Borg have been dropped, after he reached a settlement with the tax authorities due to a controversial legal mechanism introduced last year.

The court ruled that the criminal action against Borg and his companies, Princess Construction Limited, Princess Holdings Limited, Princess Operations Limited, Zing Rental Limited, and No Deposit Cars Limited, could no longer proceed. The court also revoked the freezing orders imposed on Borg and the companies.

The proceedings will continue against co-accused Monique Mizzi and Lion Funding Limited, after the court ordered that their case be heard separately.

A representative of the Tax Commissioner told the court that Mizzi had reached an agreement on Monday, both personally and through Lion Funding Limited, to pay a €1 million administrative penalty on the full amount she was accused of.

Borg and his companies had been charged with income tax and VAT evasion, false tax declarations, defrauding the Tax Commissioner and making fraudulent gains to the detriment of the government.

The case dates back to a tax investigation triggered by the VAT department, after Borg allegedly filed invoices running into hundreds of thousands of euros and claimed VAT refunds on sums listed as expenses.

Last year, government introduced legal changes allowing people accused of tax evasion to settle administratively with the tax authorities and avoid criminal prosecution. Prime Minister Robert Abela is a former legal adviser to Borg and had profited from a 2018 property deal involving him.

Lawyer Aron Mifsud Bonnici and accountant Nigel Scerri have already avoided money laundering and tax evasion proceedings through similar circumstances.

Magistrate Leonard Caruana presided over the sitting.