Tax Audits for Individual Entrepreneurs

More than 20,000 individual entrepreneurs may face tax audits

In January 2024, the Authority for Working Conditions (ACT) plans to notify approximately 20,000 individual entrepreneurs whose turnover relies on one client for 80% or more of their services about potential inspections due to signs of “false provision of services.” This was reported by Jornal de Negócios.

It’s worth noting that if a contractor—an individual entrepreneur—has a turnover share of more than 50% attributed to one client, they are considered “economically dependent” on the buyer as per Article 168 of the Código dos Regimes Contributivos do Sistema Previdencial de Segurança Social. In this case, the service recipient is required to pay a social insurance contribution of 7%, which increases to 10% when their turnover share exceeds 80%.

From a legal perspective, the fact that a service provider has a significant share of activity with the same buyer is not sufficient grounds to consider them a dependent employee. Therefore, the final decision on the presence or absence of violations will be made during the appointed ACT inspection.

Individual entrepreneurs who work exclusively with one client should expect notifications and subsequent inspections first and foremost.

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