Designers Stefano Gabbana and Domenico Dolce were ruled not guilty of tax evasion by Italy’s highest court.
The designers were convicted in June 2013 on charges of having failed to file tax declarations for a Luxembourg-based company that, according to prosecutors, was meant to evade taxes that the company should have paid in Italy, reports Wall Street Journal.
According to sources, this was one of the highest profile tax cases in Italy in recent years.
The case was sparked by the 2004 sale by the company of its main brands to a Luxembourg company called Gado.
Prosecutors alleged that Messrs. Dolce and Gabbana failed to pay about €40m for the years 2004 and 2005 as a result of the move. They filed charges against the pair in 2007.
Prosecutors dubbed the operation as a ‘sophisticated tax fraud’ and asked for a two-year jail term for the designers. They were instead sentenced to one year and eight months in prison.
However, in March 2013 another prosecutor argued that the Luxembourg company was not a dummy company created to avoid paying tax but was a real operating company.
Various Italian companies have established shell companies in Luxembourg during the 90s, making it one of the most sought-after destination for tax avoidance in Italy.