VAT: Monthly Declarations for 5,000 New Businesses by End of May – Targeting ‘Vanishing Traders’

More than 5,000 taxpayers have started professional activities since April 1 and, according to the new submission system, they must file their first monthly declaration by the end of May. Newly established businesses and professionals who began operations in April and maintain simplified accounting records are automatically included in the new monthly filing system under a decision by the Director of the Independent Authority of Public Revenue, Giorgos Pittsis. It is estimated that approximately 30,000 professionals and small individual businesses will fall into this category and will submit VAT monthly instead of quarterly, as reported by ertnews. The next phase begins on July 1, extending the measure to those who commenced professional activity between January 1, 2024, and March 31, 2025. Conversely, those registered in the tax registry before December 31, 2023, do not automatically enter the new framework but have the option to voluntarily switch to the monthly model starting October 1, 2025, if desired. The aim of these changes is to improve tax compliance and primarily address the issue of ‘vanishing traders,’ who previously would start their business legally, collect VAT, and disappear when it was time to pay the tax, causing significant losses for the public treasury. This issue was often exploited by short-lived companies, newly established firms delaying payments, and taxpayers planning to leave the country. The new process enhances transparency and acts as an early detection mechanism for suspicious cases. Over the years, measures to curb tax evasion combined with electronic transactions have significantly reduced Greece’s VAT gap. According to EU Commission data, Greece has managed to decrease its VAT gap from 29% in 2017 to 13.7% today, with the goal of further reducing it to 5% by 2029, aligning with the EU average. Concerns have also been raised by the International Monetary Fund regarding existing VAT exemptions for specific goods and services, labeling them as ineffective tax expenditures that should be gradually eliminated. Budget figures indicate that 75 categories of goods and services are exempt from VAT, benefiting consumers, professionals, and businesses with a total value of €968 million. The largest impact comes from exemptions in private education, amounting to €479.6 million. Notably, reduced VAT rates implemented during the pandemic for transportation, gyms, dance schools, cinemas, and health-related goods were permanently adopted starting January 1, 2024, at an annual fiscal cost of €305 million.