Regardless of how you receive your money, you might have to pay income taxes in your country. Ask an accountant. And yes, PayPal is one of the two methods supported by itch.io for sending you payouts. As for VAT, it has to be paid either way, for all purchases made from EU countries. Except if you let itch.io collect payments, that will be done for you automatically. Hope this helps!
Edit: also take a look at the Accepting Payments and Getting Paid FAQ.