According to the Spanish Public Prosecutor's Office, Carlo Ancelotti used companies located in the Virgin Islands and London City to receive payments related to image copyright, instead of directly declaring in Spain.
This method helps him avoid paying taxes with an amount of more than 450,000 USD in 2014 - his first season leading Real Madrid.
The prosecution had proposed a sentence of up to 4 years in prison for the 66-year-old strategist, but in the end the court only sentenced him to 1 year in prison - the minimum according to regulations. Part of the reason is that Ancelotti proactively returned the remaining tax amount from 2021 and fully cooperated during the investigation.
Under Spanish law, if sentenced to less than 2 years in prison for crimes not related to violence, violators can enjoy suspended sentences. Therefore, Mr. Ancelotti will not have to spend time in prison but can still continue his coaching work.
The incident started when Mr. Ancelotti took the job at Real Madrid in 2013. Under the contract, Real paid him about 1.6 million USD for the first season's image rights and about 2.1 million USD per season in the following years.
However, since most of the money was spent through intermediaries outside of Spain, Ancelotti paid only 20% of the tax to the UK instead of the 49% tax under Spanish law.
Although he was suspected of evasioning more than $790,000 in taxes in 2015, the case was dismissed by the court for lack of evidence showing that Ancelotti had lived in Spain for 183 days that year.
