Organized Accounting: How to Prepare Your Business for a Tax Audit

14 March 2026

6 min read

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Organized Accounting: How to Prepare Your Business for a Tax Audit por Mónica Matos - Grupo Your Contabilidade

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Introduction

A tax audit by the Portuguese Tax and Customs Authority (AT) can happen at any moment - and for many business owners, it represents a moment of stress and uncertainty. However, for those who maintain organized accounting and stay up to date, a tax audit doesn't need to be a cause for concern.

In this guide, we explain what the AT can verify, which documents you should have available, the most common mistakes that attract the tax authority's attention, and how to turn accounting into a competitive advantage for your business.

1. What is a Tax Audit and When Does it Happen?

A tax audit is a control action carried out by the AT to verify compliance with tax obligations by companies and taxpayers. It can be:

Internal - conducted based on elements available in the AT's databases, without visiting the company's premises

External - with inspectors visiting the company's or accountant's premises

General - covering all taxes and obligations for the period in question

Partial - focused on a specific tax (e.g., VAT or Corporate Tax) or a specific operation

When can you be selected for an audit?

The AT uses risk criteria to select taxpayers for auditing. Factors that increase the probability of an audit include:

Discrepancies between submitted declarations and third-party information

Profit margins well below the sector average

Sudden and unjustified variations in results from one year to the next

High volume of invoices from suppliers under simplified regime or without tax ID

Recurring VAT credits without refund requests

Reports or complaints from third parties

Business sector with high risk of fraud or parallel economy

⚠ The AT has 4 years to audit a given fiscal year. In cases of fraud or tax evasion, this period can be extended.

2. Documents You Should Always Have Organized

Well-organized accounting requires the following documents to be accessible and properly filed:

Tax and Accounting Documentation

VAT declarations (Periodic Declarations) for the last 4 years

Model 22 Declaration (Corporate Tax) for the last 4 years

IES - Simplified Business Information for the last 4 years

Withholding tax declarations (Model 10, Model 30)

Monthly Remuneration Declarations (DMR)

Proof of tax payments (VAT, Corporate Tax, Property Tax, etc.)

Commercial and Supporting Documentation

Issued and received invoices (originals or certified digital copies)

Payment receipts and bank statements

Contracts with clients and suppliers

Transport documents (delivery notes)

Inventories and stock records

Fixed asset documentation (acquisition invoices, depreciation, disposals)

Human Resources Documentation

Employment contracts for all employees

Payslips for the last 4 years

Proof of salary payments and Social Security contributions

Time records and holiday schedules

Contract termination agreements and settlement receipts

✓ Tip: digitize and organize all documentation in a clear folder structure, organized by year, document type, and month.

3. Document Retention Periods

Portuguese legislation requires keeping accounting support documents for a minimum period:

Accounting and tax documents: 10 years

VAT support documents: 10 years

Property-related documents: 10 years after disposal

Accounting records and books: 10 years

HR documentation: at least 5 years after contract termination

⚠ Since 2019, documents can be kept exclusively in digital format, provided their authenticity, integrity, and readability are guaranteed.

4. Most Common Mistakes That Attract the Tax Authority's Attention

Many tax audits arise precisely because the AT detects inconsistencies. These are the most frequent mistakes to avoid:

1. Expenses without adequate proof

Recording expenses without the respective invoice or with documents that don't meet legal requirements is one of the most common errors.

2. Personal expenses recorded as business expenses

Restaurant costs, travel, fuel, or personal purchases recorded as business expenses are easily detected and can result in tax corrections, interest, and fines.

3. Discrepancies between declared turnover and bank movements

The AT has access to companies' banking information and cross-references this data with submitted declarations.

4. Improperly deducted VAT

Deducting VAT from invoices that don't confer that right is a frequently detected infraction.

5. Salaries paid off the books

Paying remuneration in cash without reflecting it in payslips and Social Security declarations is considered undeclared work - with very serious consequences.

6. Omission of income or turnover

Not invoicing services provided or issuing invoices below actual value are high-risk practices that are increasingly easy to detect.

5. What to Do When You Receive a Notification from the AT

If you receive an audit notification, stay calm and follow these steps:

Read the notification carefully and identify the scope and period under analysis

Contact your certified accountant immediately - never respond to the AT without technical support

Gather all documentation for the relevant period and matters

Check response deadlines - AT deadlines are strict

Cooperate transparently - lack of cooperation is an aggravating factor

Analyze with your accountant whether there are discrepancies and the best way to justify or regularize them

6. How to Keep Your Accounting Always Audit-Ready

The best strategy for dealing with a tax audit is to always be prepared:

Up-to-date accounting

Accounting should be updated monthly. At Grupo Your, we ensure accounting is always current and available on the client portal 24/7.

Monthly bank reconciliations

Bank reconciliation should be done every month - one of the most effective controls for detecting errors.

Organized digital archive

Implement a rigorous digital filing system organized by year and document type.

Proactive tax planning

A good accountant anticipates situations and proposes solutions that minimize tax burden within the law. Proactive tax planning is the best defense against surprises.

Annual review before closing accounts

Before submitting Model 22 and IES, do a complete review of the year's accounting.

7. Company Rights During an Audit

It's important to know your rights as a taxpayer:

Right to be informed about the scope, nature, and extent of the audit

Right to have your certified accountant present at all audit activities

Right to obtain copies of all documents collected by inspectors

Right to file a complaint or hierarchical appeal

Right to a prior hearing before any additional tax assessment

Right to be treated with respect and minimal disruption to business

Conclusion

A tax audit doesn't have to be a nightmare. For companies with organized accounting, orderly documentation, and a trusted certified accountant, it's just another administrative process.

Grupo Your works every day to ensure our clients are always prepared: up-to-date accounting, declarations submitted on time, and proactive tax planning. If you want the peace of mind of knowing your company is ready for any audit, contact us at grupoyour.com or via email at info@grupoyour.com.

Also use our financial simulators to anticipate scenarios and optimize your company's tax management.