Portugal's 2025 State Accounts Break the Budget Law, the Court of Auditors Rules, and 12 Billion Euros of Unpaid Tax May Never Come In

Portugal's accounts for 2025 do not comply with the law that governs the state budget, the Tribunal de Contas (Court of Auditors) ruled on Tuesday. The accounts still leave out the consolidated statements for central government and social security that the law requires, so the court could not certify them. Its opinion, sent to Parliament, lists 57 recommendations and warns that some of the state's biggest liabilities, pensions among them, are missing from the books.

The Parecer sobre a Conta Geral do Estado de 2025 (Opinion on the 2025 General State Account) runs to 278 pages, with a 12-page executive summary and a 223-page annex of replies from ministries and agencies. It was published on the court's website on 29 September. This account is taken from those documents.

What the court found wrong with the accounts

The central problem is structural. Since the budget framework law was rewritten, the state has been meant to present one set of consolidated budget and financial statements for central government and social security together, which the court would then certify. The 2025 account again does not contain them. Without them, the court says, nobody can see "a complete and integrated" picture of the state's finances, including "the whole of the State's liabilities, including those relating to pensions", the risks to public finances and fairness between generations.

Beyond that gap, the court lists errors that distort the figures:

• Consolidation overstates consolidated revenue and spending by at least 846 million euros, because many flows between public bodies are not cancelled out.
• Six central government bodies were left out, or did not report their spending.
• About 133 million euros of support is still paid by deducting it from tax revenue, rather than being recorded as spending, and dividends from state firms are booked net, understating them by 194 million euros.
• The tax cost of a third of all tax benefits (101 of 320) is not measured at all.
• There is still no inventory of the state's property, and the account leaves out 22.5 billion euros of debt held by autonomous public bodies.
• The Armed Forces paid 179 million euros in 2025 for the use of state buildings that was only due in 2026, which the court says "distorts" the year's budget.

Of the 67 recommendations the court made on the 2023 account, 47 (70 percent) have been fully or partly carried out, and 20 have seen no action. It repeats 50 of them this year.

The year in figures

Central government and social security together ended 2025 with a deficit of 131 million euros. Central government ran a deficit of 6,855 million euros, almost entirely offset by a social security surplus of 6,723 million euros. Revenue rose by 7,990 million euros and spending by 7,521 million euros.

Tax revenue reached 65,587 million euros, up 6.9 percent. VAT brought in 26,690 million euros, the biggest increase of any tax, which the court puts down to higher consumer spending. Personal income tax (IRS) brought in 18,583 million euros, helped by more people in work and smaller refunds.

On the spending side, pensions and other direct social benefits rose by 2,439 million euros and staff costs by 1,899 million euros, mainly in health and education. The state paid 37,574 million euros in pensions through Social Security and the Caixa Geral de Aposentações (the civil servants' pension fund), for 3,687,244 pensions in payment at the end of the year. Investment again fell short: spending was 2,294 million euros below the budget, with transport, housing and health furthest behind. Only defence spent more than planned, by 695 million euros.

Public debt stood at 262,122 million euros, up 1.6 percent. The court warns that 61 billion euros must be refinanced between 2026 and 2028, that the cost of new borrowing is set to rise, and that the share held by non-resident investors, who react faster to risk, rose from 24.8 to 30.9 percent in a year.

Twelve billion euros of tax the state may never collect

At the end of 2025 the Autoridade Tributária e Aduaneira (AT, the tax and customs authority) was pursuing 29,592 million euros of overdue tax through enforcement, equal to 45.1 percent of the year's tax revenue. Of that, 12,088 million euros is considered uncollectable, up 682 million euros in a year. Almost 60 percent of the uncollectable debt is owed by companies that have stopped trading for VAT purposes. The court calls the growth "a risk to the sustainability of public finances".

Suppliers are also waiting longer. Bills more than 90 days overdue reached 139 million euros at the end of 2025, up 91.1 percent on 2024, with much of it in the health service. Public hospital units ended the year owing 380 million euros in overdue debt, even after 1,299 million euros of capital injections to cover losses.

Tax breaks worth 20.9 billion euros

Tax benefits cost the state 20,934 million euros in lost revenue in 2025, 44.3 percent more than in 2021 in real terms, and that figure leaves out the third of benefits that are not measured. Reduced and intermediate VAT rates account for 12,278 million euros. The former non-habitual resident (NHR) regime, abolished for new applicants in 2024, still cost 2,099 million euros in income tax, almost two thirds of the tax lost to all income tax breaks. Its replacement for researchers and skilled workers had 946 people registered in May 2026, the court found.

The court also examined the state's support for the banks. Since 2008, net public support for the financial sector has reached 20,667 million euros. In 2025 the balance ran 617 million euros in the state's favour, thanks mainly to a capital reduction at Novo Banco, but the assets the state holds in return are worth less than half of what it has spent.

Social security: a surplus, and gaps in the books

Social security's surplus grew from 5,536 million euros in 2024 to 6,723 million euros, driven by contributions. The court warns that the extra contributions are largely a product of the economic cycle, while pressure on spending is "structural", driven by ageing and by benefits already granted. Its reserve fund, the Fundo de Estabilização Financeira da Segurança Social (Social Security Financial Stabilisation Fund), reached 41,947 million euros and met its legal goal of covering two years of pensions. But the taxes set aside for the fund since 2017 have fallen 370 million euros short of what the tax authority collected for it.

The court could not confirm that everything owed to social security appears on its balance sheet. It flags 11,370 million euros of doubtful debts, 97.3 percent of them written down. It could not trace the effect of the extraordinary pension rise approved for 2025 in the accounts at all.

Social Security owns 3,059 properties in 205 municipalities, with a book value of 542 million euros. Just under half are rented out, 11 percent house its own services, and more than 30 percent are empty, occupied without a valid contract, or occupied improperly. About half of the empty ones are being renovated.

Support for victims of natural disasters also came in slowly. Emergency measures cost 1,347 million euros from 2022 to 2025, but the court found delays in paying one-off grants and says the contribution waivers promised since 2022 were only granted from 2025. The new wildfire support model approved in August 2025 did not yet deliver timely payments that year.

European money stuck in the pipeline

By the end of 2025 Portugal had received 13,797 million euros from the EU recovery plan (PRR), 63 percent of its allocation. Direct and final beneficiaries had been paid 10,798 million euros, but more than 2 billion euros was still held "at an intermediate stage of the financing chain", without reaching the economy. The court calls the plan's planning "unsuitable", saying repeated revisions and cuts to its targets undermined the reforms it was meant to deliver. Portugal 2030, the current EU cohesion programme, had paid out only 14.7 percent of its funds after four years.

Even the reform meant to fix the state's accounting has slipped. Recovery plan money for its information systems was cut from 122 million euros to 16.1 million euros, and about 10 million euros was still unspent in June 2026. The court sees a high risk that those projects will not be finished with recovery plan funds, and they now run to 2029.

What happens next

The opinion goes to the Assembleia da República (Parliament), which votes on whether to approve the account, and to the government, which is responsible for acting on the recommendations. Ministries and agencies that received the draft could comment, and their replies are published in the annex.

For background on the account itself, see our report on Portugal's 2025 surplus and the central state's deficit.

Source: Tribunal de Contas, Parecer sobre a Conta Geral do Estado de 2025, executive summary, two-page summary and annex of replies, published 29 September 2026.