Portuguese authorities have charged Brazil's national coach Luiz Felipe Scolari with tax fraud, less than a month before the World Cup starts, a prosecution spokesman told AFP on Wednesday.
Investigators said they have asked the United States, Britain, the Netherlands and Brazil for assistance in the case.
Scolari is accused of hiding about seven million euros ($9.6 million) in income when he was Portugal's coach between 2003 and 2008, according to media reports.
He has denied any wrongdoing. But the inquiry threatens to taint Brazil's preparations to host the World Cup, which starts on June 12.
Scolari coached Brazil to their World Cup triumph in 2002 and has returned to the national side for the campaign on home territory which they are favourites to win.
Portugal reached the final of Euro 2004 as hosts and the World Cup semi-finals in 2006 when Scolari was in charge.
The Portuguese inquiry is being carried out by the Central Department for Criminal Investigations and Penal Action (DCIAP).
The department, an arm of the Prosecutor General's office, confirmed in a statement that "Luiz Felipe Scolari stands accused in an investigation."
"This probe is investigating happenings dating back to the period between 2003 and 2008 and is related to eventual fiscal infractions," it added.
"In the course of these investigations, international assistance was requested from the Netherlands, Britain, Brazil and the United States. The request to the USA is still to be answered."
The statement did not give a figure for the alleged fraud and said "investigations are ongoing."
Scolari, 65, has made a personal fortune from his work with Brazil and Portugal but also as a club manager with teams such as Chelsea.
Scolari has also worked as a coach in Japan, Kuwait and Uzbekistan.
Dutch newspaper Financieele Dagblad said Scolari received money from two Netherlands-based companies, Chaterella Investors Limited and Flamboyants Sports.
Portugal has asked US authorities for assistance in the inquiry as the money was believed to have been transferred to the United States, the Dutch daily added.
Financieele Dagblad said that Scolari transferred money through companies based in the Bahamas and other tax havens.
"I made all my income tax declarations correctly," Scolari said in a statement in reaction to the press reports.
"I always declared my earnings in all the countries I worked in," he insisted.
"I am absolutely convinced of the correctness of my declarations.
"If there is something wrong it is not of my doing," said Scolari, who invited the authorities to look into "all the facts."
The Brazilian Football Confederation (CBF) have yet to comment on the case, which has been given widespread attention in Brazil.