Fashion design duo Domenico Dolce and Stefano Gabbana have been sentenced to one year and eight months in prison for tax evasion.
An Italian court charged the designers, who are behind high-profile designer label Dolce & Gabbana, with hiding hundreds of millions of euros from the tax authorities, with the judge ruling that the pair had sold their brand to a Luxembourg-based holding company in 2004 to avoid declaring taxes on royalties of about one billion euros.
The men were not present in court and have denied the charges. Due to the complexity and length of the appeals process, it is unlikely that they will spend any time in prison.
The case dates back to an investigation that began in 2007, when authorities clamped down on tax avoidance after the financial crisis had set in.
Charges were brought against the designers, and five other individuals, after their two brands, Dolce & Gabbana and D&G, were sold to Gado Srl.
The Guardia di Finanza believed that Gado was a legal body set up to enable the pair to avoid the country's high corporate taxes. It meant that profits from the two labels were taxed abroad and not in Italy, where authorities believed Dolce & Gabbana and D&G were still being managed from.
In April 2011, Judge Simone Luerto dismissed charges against them as unsubstantiated. But in November 2011, the Supreme Court of Cassation overturned the ruling and ordered a retrial saying, "tax avoidance, or tax mitigation on an earnings declaration is a criminal offense under the law".