The director-general of the Tributary and Customs Authority (AT), Helena Borges, said this Wednesday in Parliament that the case over the IRS of former national coach Fernando Santos “is not closed” and that “new developments” are anticipated.
In the parliamentary budget and finance committee, Borges was not explicit in saying that the tax authorities, after a first inspection of the coach’s 2016 and 2017 income statements, continue to investigate the IRS to control the payment of the tax for the years to come. followed, but hinted that this is happening.
When the tax authorities observe behavior suspected of being abusive, “as a rule” it extends inspection “to the entire period in which the scheme was practised”, limited “for the period of expiry that the law” imposes, said the official, in response to a question from PSD deputy Patrícia Dantas.
Regarding the IRS for 2016 and 2017, the tax authorities considered, and saw the arbitral tribunal confirm it, that Fernando Santos resorted to an abusive means to pay less taxes in relation to the work provided to the Portuguese Football Federation (FPF) through the interposition of a sole proprietorship company, Femacosa, declaring the income earned in IRC and not in the personal sphere, in IRS, thus achieving a lower tax burden.
Deputy Miguel Cabrita, from the PS, the parliamentary group that took the initiative to call the highest tax official to Parliament, wanted to know if the case was concluded and Borges, in this regard, was clear in saying “no”. It was not, however, explicit as to whether the case is not closed simply because the final word will rest with the courts (as Fernando Santos continues to challenge AT’s 2016 and 2017 IRS settlements) or whether there is a subsequent investigation (having taking into account that the technician continued to provide services to the federation in the following years through Femacosa, having been coach from 2014 until the beginning of 2023).
Saying that, in relation to “this specific case”, that of the inspections of Fernando Santos, it cannot be very explicit in order to preserve tax secrecy, Helena Borges ended up saying: “I can say that it is not closed. There will definitely be new developments. Some of them depend only on us; others may depend on third parties. It’s in the public domain and what’s talked about [na esfera pública] it is not substantially different from what we observed, this is perhaps important to mention to see if we are all working on an error and talking about what was actually observed or constructions that are being made in the press”.
O Express reported that the Public Ministry opened a criminal investigation, which will be running at the Central Department of Investigation and Penal Action (DCIAP) with the participation of the AT, something that Borges did not mention.
Despite this, the director-general stressed that the subject of Fernando Santos continues to deserve AT’s attention. “It will naturally be extended to other areas of our activity, to other sectors and, certainly, it will even be one of the schemes that we tend to disclose as abusive within the framework of what we have an obligation to disclose to guarantee that, through this disclosure, there is general prevention of the adoption of these practices in other sectors of activity and by other economic agents”.
The concrete description of the planning scheme is public, because Fernando Santos contested the additional assessments applied by the tax authorities in an arbitration court and the judgment of the case, favorable to the tax authority, is published on the website of the Centro de Arbitragem Administrativa (it is case no. 860/2021-T and it is possible read the decision here).
Helena Borges believes that the case of Fernando Santos “may have a general preventive effect and [gerar] a greater perception on the part of citizens who resort to similar practices or companies that seek to extract benefits” of the possibilities that “the legal framework makes available to them”.
The director was asked to explain how one-person companies are misused to receive income from work. Borges said that, in itself, the organization of the corporate form through sole proprietorships by quotas is foreseen in the law and may be justified by the “individual exercise of an economic activity”, the problem is that they may be used in an abusive way.
“We do not question whether there is a large expression of societies [unipessoais] or limited liability companies or limited liability companies — that is a choice for economic agents. What worries us are the situations that may present themselves as an abuse of these possibilities that the legislator makes available to economic agents and that are, in themselves, harmful”, a deviation in relation to the tax revenue “that is intended to be achieved with the legal framework that was defined without abuse,” he said.
Borges stressed that this is the concern, “not so much the expression that these activities have now”, not least because, he recalled, there are today “new forms of work organization” in which many people “do not want to opt for formal employment relationships, they are entrepreneurs” and this may be one of the reasons for creating sole proprietorships.
It is necessary to “distinguish between those who use this figure lawfully — and they will be the majority, we believe by what is the standard of compliant Portuguese citizens — and a fringe that naturally makes use of this legal framework with abuse”. The AT, he says, does not know “exactly what percentage of that fringe will commit abuse, but there will always be some and it is in the search for those” that the tax authorities direct their attention.
Vote on Fernando Gomes postponed
In another parliamentary committee, where health matters are addressed, a vote was scheduled for this morning on a request by the BE to urgently call the president of the Portuguese Football Federation, Fernando Gomes, to Parliament, but the vote was postponed at the request of the PS .
The Bloc had already asked for the sports leader to be heard in the budget and finance commission, but the request was rejected by the socialist parliamentary group.
BE deputy, Mariana Mortágua, confronted the director-general about the risk of tax planning in some sectors of activity, with the use of service provision contracts, such as in health, with working doctors in which companies may be set up and minus “expenses that are not actually related to their professional activity”.
Borges explained that the AT controls these activities, but acknowledged that they are not “massified”, with “an area of risk of revenue erosion”. removes these charges from the range of accepted expenses.