The fashion designers Domenico Dolce and Stefano Gabbana were given a suspended prison sentence of a year and eight months on Wednesday for what prosecutors claimed was a sophisticated system of evading tax on income of around €1bn ($134030000.00 U.S ).

A court in Milan ruled that the pair had sold their world-famous brands to a Luxembourg-based holding company in 2004 to avoid declaring tax on royalties. They were also slapped with a suspended fine of €500,000 ($670150.00 U.S.) owed to Italy‘s national tax agency.

The duo, who were not in court for the ruling and made no immediate statement, have always denied any wrongdoing and their lawyers said they would appeal.

Under Italian law, a sentence of this kind is suspended until the conviction is made definitive. Given the length of the appeals process, it is unlikely Dolce or Gabbana will ever see the inside of a jail cell. A separate charge of misrepresenting income had already passed the statue of limitations.

In her closing speech to the court on Wednesday, prosecutor Laura Pedio said there was “rock-solid proof” that the designers had carried out a sophisticated system of tax evasion, the Ansa news agency reported.

Her colleague Gaetano Ruta said the holding company, Gado – a combination of the two men’s surnames – was an artificial construction “whose aim was to get a tax advantage”. The prosecutors had asked the court to hand down a sentence of two-and-a-half years, but the judge decided to be more lenient.

Massimo Dinoia, the lawyer for Dolce and Gabbana, had declared the case to be “the paradox of paradoxes” because the amount they were charged with evading “exceeded the income by a large margin”.

The conviction marks the latest point in a long and winding path that began in Luxembourg in 2004 and 2005, when Dolce and Gabbana transferred control of their two brands to Gado – a move prosecutors argued was made deliberately in order to evade tax.

In 2008, as the financial crisis was starting to put increasing pressure on state coffers, the Italian authorities began in an investigation into Gado. Italy is estimated to lose €120bn every year in unpaid taxes, much of it though holding companies registered in offshore centres such as Luxembourg.

A case charging the pair with tax fraud and tax evasion was thrown out by a judge two years ago, but Italy’s supreme court subsequently ruled in November that the men could be prosecuted, if only for the latter charge.

SOURCE: Guardian