Greece moves towards VAT split payments to tackle evasion and stabilise revenues
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Greece is considering a VAT split payment model, under which part of the VAT is paid directly to the tax authorities at the point of transaction.
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While the measure could materially reduce VAT arrears and the VAT gap, it would significantly change cash-flow dynamics for Greek businesses.
- Follows other countries, such as UK, evaluating the measure
Greece is preparing a further step in the digitisation and enforcement of VAT collection, with the Independent Authority for Public Revenue (IAPR) assessing the introduction of a VAT split payment mechanism. Under this approach, customers would effectively pay VAT directly to the state, rather than suppliers collecting and later remitting the full amount.
The proposal reflects ongoing concerns about VAT compliance and the scale of unpaid VAT in Greece, despite recent improvements driven by electronic invoicing, electronic bookkeeping and tighter controls at the point of sale.
How the split payment model would work
Under the system being evaluated, a portion of the VAT due on each transaction would be automatically diverted to the tax authorities at the time of payment. For example, where a transaction generates €50 of VAT, between €15 and €25 could be transferred immediately to the state, with the remainder staying with the supplier until final VAT settlement.
From the tax authority’s perspective, this would materially reduce collection delays and reliance on instalment arrangements. For businesses, however, it would remove access to funds that have often been used in practice as short-term working capital, notwithstanding that VAT is legally owed to the state.
UK Split Payments pilot is currently ongoing, with Netherlands split payments also under consideration.
Why Greece is pursuing split payments
Unpaid VAT remains the single largest component of Greece’s collectible tax arrears. Of approximately €85 billion in overdue tax debt considered realistically recoverable, around €25 billion relates to VAT. This structural issue was one of the drivers behind Greece’s move to monthly VAT filing, after the authorities concluded that many small and medium-sized businesses were unable to meet VAT liabilities when they fell due.
Split payments are seen as a way to address the problem at source, by ensuring at least part of the VAT is secured at the moment of sale rather than chased later.
Implementation challenges and pilot phase
A fully automated split payment model would require changes across the payments ecosystem, including upgrades to POS systems, card payment flows and cash register software. The IAPR has indicated that newer cash registers already support the necessary functionality, reducing the technical barrier.
Implementation is expected to begin with a pilot phase focused on service providers, where transaction flows are simpler, before expanding into the broader retail sector.
Two models under consideration
The tax authority is reportedly examining two alternative approaches:
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Fixed percentage model: A standard proportion of VAT (for example 30% or 50%) would be automatically transferred per transaction. The remaining VAT would be netted off against deductible input VAT, with any balance payable the following month. Refunds would be processed within 30 days.
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Individualised rate model: Each business would have a tailored split payment percentage, calculated using prior-year turnover and VAT payment history.
Both options aim to balance revenue security for the state with some flexibility for businesses that have a strong compliance record.
Part of a wider VAT compliance strategy
The proposal builds on recent compliance gains. Expanded card usage, mandatory electronic bookkeeping and the interconnection of cash registers with POS systems have already reduced VAT leakage. According to European Commission data, Greece’s VAT gap fell to 11% in 2023, down from 13.7% in 2022 and substantially lower than in 2019. While still above the EU average of 9.5%, officials believe Greece could reach that benchmark by the end of 2026.
See our Greek VAT guide for more background.
Greece’s move towards VAT split payments mirrors a broader European trend towards real-time, transaction-based VAT enforcement. For affected businesses, early preparation will be essential to manage both operational and financial impacts.
