Introduction to the Concept of Tax Crime in Portugal

Tax crime represents one of the most serious offenses in the Portuguese legal-tax system, distinguished from simple administrative offenses by its intentional nature and the value of the loss caused to the public treasury. In a context of increasing digitalization and data crossing by the Tax and Customs Authority (AT), the line separating legitimate tax planning from illicit evasion has become clearer but also more scrutinized. Understanding what constitutes a tax crime is essential for any manager, entrepreneur, or investor in Portugal, as the consequences go beyond the financial sphere and can affect the individual freedom of those responsible.

In Portugal, the General Regime for Tax Offenses (RGIT) is the fundamental legal framework that defines the types of crimes, applicable penalties, and requirements for punishment. It is crucial to note that the Portuguese tax system is based on the principle of good faith and collaboration, but the violation of these principles through fraud, breach of trust, or tax swindling triggers criminal justice mechanisms aimed at protecting State revenue and social equity.

The Distinction Between Tax Fraud and Breach of Tax Trust

One of the pillars of tax criminal law in Portugal lies in the distinction between Tax Fraud and Breach of Tax Trust. Tax Fraud, provided for in Article 103 of the RGIT, occurs when there is illegitimate conduct aimed at the non-liquidation, delivery, or payment of the tax benefit. This may involve hiding facts, simulating business deals, or using fake invoices. The goal is to artificially reduce the taxable base or increase deductions.

On the other hand, Breach of Tax Trust, typified in Article 105 of the RGIT, refers to the situation where the taxpayer withholds the tax (such as VAT or IRS withheld at source from workers) but does not deliver it to the State within the legal deadlines. Here, the crime lies not in lying about the amount due, but in the misappropriation of funds that already belong to the State.

Practical Case 1: The Danger of Fictitious Invoicing

Imagine Company A, operating in the construction sector. To reduce its taxable profit for Corporate Income Tax (IRC), the company decides to purchase invoices for consultancy services that were never rendered, in the amount of €50,000. With an IRC rate of 21%, the company tries to evade €10,500 in tax. Under Article 103 of the RGIT, if the value of the equity advantage is greater than €15,000, it is a crime of tax fraud. If the AT detects this situation through the e-fatura system, the company will not only have to pay the €10,500 plus compensatory interest, but the managers will face a criminal process that could lead to prison sentences of up to 3 years or a fine of up to 360 days.

The Crime of Breach of Trust Against Social Security

No less important is the crime of breach of trust against Social Security, provided for in Article 107 of the RGIT. This crime occurs when employers deduct worker contributions from salaries (the usual 11%) but do not deliver them to Social Security within 90 days after the end of the legal period. This is a common crime during periods of company liquidity crises, but the consequences are severe.

The law is clear: the failure to deliver the deducted benefits is punishable by up to 3 years in prison or a fine of up to 360 days. It is fundamental for managers to understand that paying net salaries without the corresponding delivery of withholdings constitutes a serious violation of public trust.

Responsibility of Managers and Directors

In Portugal, the principle of criminal responsibility of legal persons applies, but this does not exclude the individual responsibility of its governing bodies. According to Article 7 of the RGIT, legal persons are responsible for offenses committed by their bodies or representatives in their name and in the collective interest. However, managers and directors can be personally held liable if they were aware of the offense and did not prevent it, or if they directly ordered it.

This responsibility is particularly sensitive regarding tax reversal. If the company does not have the assets to pay tax debts resulting from crimes or administrative offenses, the AT can reverse the execution against the personal assets of the managers (Article 24 of the General Tax Law - LGT). To avoid reversal, the manager must prove that the failure to pay was not attributable to them or that the company lacked funds for reasons beyond their management.

Common Mistakes to Avoid

• Confusing Cash Flow with Profit: Using VAT money to pay suppliers instead of reserving it for the State.
• Accepting Invoices from "Doubtful" Suppliers: Deducting VAT from companies that lack the human or material structure to provide the service is an immediate red flag.
• Ignoring AT Notifications: The deadline to respond to an inspection notification is crucial to prevent clues from turning into criminal charges.
• Thinking Responsibility lies only with the Accountant: The criminal and civil responsibility for tax management ultimately lies with managers and directors.

Sources and Legal References

• RGIT: General Regime for Tax Offenses (Articles 7, 103, 104, 105, and 107).
• LGT: General Tax Law (Articles 24 and 38).
• CIRC: Corporate Income Tax Code (Article 88).
• CIVA: Value Added Tax Code.
• Portuguese Penal Code: Subsidiarily applicable to penalties and responsibility.