EU AI Act Penalties: How Much Could Your Business Be Fined?

The EU AI Act Has Teeth

Unlike some regulations that rely on voluntary compliance, the EU AI Act comes with substantial financial penalties. The fines are designed to deter non-compliance at every level — from Big Tech to small businesses.

If you use AI in your business and operate within the EU, understanding these penalties is not optional. It is essential risk management.

Three Tiers of Fines

The EU AI Act structures penalties into three tiers based on the severity of the violation:

Tier 1: Prohibited AI Practices — Up to EUR 35 Million or 7% of Turnover

The most serious violations involve using AI that is outright banned under the Act. These include:

• Social scoring — rating citizens based on social behavior
• Manipulative AI — systems that exploit vulnerabilities or manipulate decisions subconsciously
• Untargeted facial recognition scraping — building databases from internet or CCTV images
• Emotion recognition in workplaces and schools — without consent or legal basis
• Real-time biometric identification in public — with limited law-enforcement exceptions

If your business uses any of these prohibited practices, you face the maximum penalty. These bans took effect on February 2, 2025.

Tier 2: High-Risk Violations — Up to EUR 15 Million or 3% of Turnover

High-risk AI systems have the most extensive obligations. Failing to meet them triggers this tier. Common high-risk categories include:

• AI used in recruitment and HR decisions
• Credit scoring and financial assessment tools
• AI in education (grading, student assessment)
• Systems used in law enforcement or border control
• AI for critical infrastructure management

Violations include deploying a high-risk system without proper risk assessment, lacking required documentation, or failing to implement human oversight. Full enforcement begins August 2, 2026.

Tier 3: Misinformation — Up to EUR 7.5 Million or 1.5% of Turnover

This tier covers providing incorrect, incomplete, or misleading information to national authorities. Examples include:

• Filing inaccurate conformity declarations
• Failing to report serious incidents
• Providing false information during market surveillance
• Not cooperating with regulatory inquiries

How Fines Apply to SMBs

The EU AI Act includes a proportionality rule for small and medium-sized enterprises. For each tier, the fine is the lesser of the fixed amount or the turnover percentage.

For example, a company with EUR 2 million annual turnover:

• Tier 1 max: 7% of EUR 2M = EUR 140,000 (not EUR 35M)
• Tier 2 max: 3% of EUR 2M = EUR 60,000
• Tier 3 max: 1.5% of EUR 2M = EUR 30,000

These amounts may seem smaller than the headline figures, but for a small business, a EUR 60,000 to EUR 140,000 fine can be devastating.

Prevention Is Cheaper Than Penalties

The cost of compliance is a fraction of even the smallest potential fine. Consider:

• A dedicated compliance consultant: EUR 5,000-20,000+
• AktAI platform: starting at EUR 49/month (EUR 588/year)
• A single Tier 2 fine for an SMB: potentially EUR 60,000+

Investing in compliance today is straightforward risk management.

What Should You Do?

1. Check your exposure — Use our free penalty calculator to estimate your potential fine based on your company's turnover and AI usage.

1. Classify your AI systems — High-risk classification triggers the most obligations. Know where your tools sit.

1. Start documenting — Documentation is the foundation of compliance. If you cannot prove your measures, they may as well not exist.

1. Get compliant before August 2026 — The full high-risk enforcement deadline gives you time, but the AI literacy requirement is already in effect.

Find out your potential exposure now with our free fine calculator.