Rising prices and digital tax controls are driving VAT revenues to record levels, channeling unprecedented sums into state coffers. The prolonged wave of price increases is inflating nominal turnover — and consequently the VAT applied to transactions — while the Independent Authority for Public Revenue (AADE), armed with artificial intelligence, the myDATA platform, and real-time electronic cross-checks, is steadily closing the loopholes that enable tax evasion.
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VAT revenue hits record highs: digital audits and inflation drive surge
The results are already visible in this year’s first-half data, with VAT collections significantly exceeding budget targets — surpassing €14.5 billion against a target of €13.6 billion, representing an overperformance of approximately €880 million. The picture becomes even more impressive when compared to the same period last year, when around €12.8 billion flowed into state coffers.
It is worth noting that total VAT revenues for 2025 had reached €29.2 billion. If the same momentum is maintained in the second half of the year, tax revenues are expected to strengthen further. This development also creates additional fiscal space: the overperformance in tax revenues, combined with expenditure restraint, is expected to be reflected in the primary balance. Based on current data, the primary surplus is estimated to potentially exceed the government’s updated forecast of 3.2% of GDP and could, under the right conditions, climb above 4% of GDP.
A significant portion of the increased revenues stems from inflation, as the prolonged rise in prices — particularly across essential goods and services — inflates nominal turnover and, along with it, the VAT due on transactions. The higher the final price of a product or service, the greater the tax amount that flows to the state, even when actual sales volumes do not increase proportionally. This portion of VAT revenues therefore does not reflect a corresponding expansion in real economic activity.
However, the remaining share — linked to the reduction of tax evasion and the digitization of transactions — carries a different significance: it broadens the tax base and enhances compliance. VAT returns are now pre-filled automatically using data transmitted through the myDATA electronic bookkeeping platform. Any discrepancy between declared amounts and transmitted data triggers an automatic alert in the system, prompting targeted audits.
Businesses that show significant deviations from sector benchmarks, sharp fluctuations in turnover, or mismatches between their declared figures and electronically recorded transactions are automatically flagged by the tax authority. VAT data is cross-referenced in real time with POS terminal receipts and bank account activity through the Bank Account Registry System.
Heavy penalties for non-compliance
At the same time, tax legislation imposes steep fines on business owners and self-employed professionals who file late initial or amended VAT returns after receiving notice of a tax audit.
Specifically, if no VAT return has been submitted at all and the violation is identified by tax authorities during an audit, a penalty of 50% of the tax due on the unfiled return is imposed.
The same rate applies when a taxpayer files a late initial or amended VAT return after receiving an audit notice or an information request from the tax office, up until the notification of the provisional corrective tax assessment. The penalty is calculated at 50% of the tax owed or the additional tax difference identified.
There is, however, room to reduce the financial burden. The penalty, together with the applicable interest, is reduced to 60% of the original amount if the full debt is settled within 30 days of the tax assessment. In practice, this means the effective penalty burden is reduced to 30% of the tax owed.
More favorable treatment is available for those who voluntarily correct their returns before receiving an audit notice. In this case, the 50% penalty is not triggered. Instead, a fixed administrative fine of €100, €250, or €500 is imposed — depending on the category of the business’s accounting books — along with a late payment interest charge of 0.73% per month of delay.
An even greater reduction in penalties is available for those who, following an audit, accept the tax assessed against them. If a taxpayer accepts the amount resulting from the provisional tax assessment, does not request continuation of the audit, and does not appeal to the Tax Disputes Resolution Directorate or subsequently to the administrative courts, the “acceptance of tax audit acts” procedure applies.
