In the 2024 report on combating tax and customs fraud and evasion, delivered to parliament last week, the government indicated that this was one of the three main areas identified by the Finance Department as being “at high risk of fraud” affecting state revenue over the past year.
The inspection area of the Tax and Customs Authority (AT) conducted a study to map “situations of intermediary commercial companies in the receipt of compensations and/or other salary supplements (e.g., bonuses), through companies owned by their beneficiaries”.
In their work, tax inspectors found specific situations that “revealed signs of tax planning schemes aiming primarily to reduce the personal tax liability owed by the beneficiaries of compensations, salary supplements, and/or independent work income concerning IRS, and to deduct expenses relating to IRC (by means of the invoice issued by the intermediary company), without proper autonomous taxation by the paying company”.
These strategies are used by taxpayers in an attempt to avoid personal taxation under IRS and benefit from lower taxation under IRC through the company.
In 2023, in relation to a case involving the hiring of former national coach Fernando Santos by the Portuguese Football Federation (FPF) through a company owned by the coach, the AT director-general, Helena Borges, was summoned to parliament to clarify how single-person companies are inappropriately used for compensating work revenues.
During a hearing on March 8, 2023, Helena Borges stated that structuring in this manner can be justified when used by workers conducting economic activity individually, though issues arise if beneficiaries resort to forms of “abuse” that violate the “options provided by legislators to economic agents”.
Meanwhile, AT included the control of compensation payment schemes and salary supplements as part of its investigation efforts to combat complex tax fraud situations.
In 2024, the Finance Department conducted studies on high-risk sectors to “define and adopt global strategies” of tackling fraud while also carrying out “targeted actions” in administrative investigations aimed at verifying the fraud indicators previously identified among taxpayers, as stated in the report.
Besides controlling the insertion of commercial companies, there were two other areas where AT developed studies and noticed risk situations.
One relates to the issuance of false invoices. The AT discovered companies without an “apparent structure for conducting economic activity” that failed to remit “VAT from invoices addressed to the State” to the public treasury, according to the report.
These intermediaries “enable users to reduce the VAT amount payable to the State or request VAT refunds, causing substantial losses to the public treasury,” the government noted in the document.
Another inquiry line involved the “behavioral analysis” of new companies in an “early activity stage”, intended to identify those likely established to facilitate fraud situations.
Implementation of this control system began in 2023. The following year, AT continued the project and, in conjunction with other internal teams, identified two VAT fraud networks.
