In a statement, the Brazilian said " I had always declared my earnings in all the countries I worked in".
"I am absolutely convinced of the correctness of my declarations. If there is something wrong, it is not of my doing," Mr Scolari's statement reads.
Portugal's move will be a unwanted distraction for Brazil's football team as they prepare for the World Cup.
The attorney general's office in Portugal confirmed the
investigation, which is being carried out by the Central Department for
Criminal Investigations and Prosecutions.
Mr Scolari had been named an "arguido" (suspect), a statement
said, as part of an investigation into events between 2003 and 2008
that concerned "a possible breach of tax regulations".Funds According to Dutch and Portuguese media reports, the investigation focuses on payments of 7.4m euros ($10m; £6m) made to Mr Scolari during his time as Portugal coach.
Dutch daily Het Financieele Dagblad published a document which alleges that Mr Scolari did not declare the income, which is said to stem from image rights.
The newspaper said that Mr Scolari transferred money through companies based in the Bahamas and other tax havens to a bank account in Miami.
Portugal has asked US authorities for assistance in the inquiry and has also sent requests to Britain, the Netherlands and Brazil.
He led Brazil to victory in the 2002 World Cup and last week announced his squad for the 2014 World Cup due to start in Brazil on 12 June.
As well as managing Brazil and Portugal, Mr Scolari has also coached in Japan and the Middle East and was boss of Premier League club Chelsea between 2008-09.
Portugal's government has set up special investigative teams and increased penalties in an effort to crack down on tax evasion.
The country needed a bailout of 78bn euros ($107bn/£64bn) in 2011 after high debts pushed it to the brink of bankruptcy
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