The Spanish Public Prosecutors Office are seeking a four year and nine month prison sentence for Real Madrid manager Carlo Ancelotti for his alleged involvement in tax fraud.
Ancelotti was charged in 2020 after being accused of failing to pay roughly €1million (£900,000) in taxes. Spanish prosecutors said this was in relation to image rights earned during his time as Real Madrid manager in 2014 and 2015.
Ancelotti is expected to dispute at least a portion of the charges against him.
The charges against Ancelotti involve two offences against the Public Treasury. Despite declaring himself as a tax resident in Spain and listing his domicile as Madrid, he allegedly failed to include income from image rights in his tax returns.
Ancelotti purportedly engaged in the simulation of image rights to entities lacking real activity and resided outside Spain. This strategy aimed to obscure the true beneficiary of the income from his image rights, thus evading taxes both in Spain and abroad.
Ancelotti has also been accused of signing private contracts assigning his image rights to entities for substantial sums, later modifying agreements to reduce prices significantly. Additionally, it is claimed he assigned 50 per cent of his image rights to Real Madrid while retaining ownership through an undisclosed partnership.
Ancelotti has been successful in his time as Real Madrid manager (Gonzalo Arroyo Moreno/Getty Images)
According to the Prosecutor’s Office, Ancelotti’s tax declarations showed negative balances due to omitted income from image rights exploitation, resulting in tax refunds. The total loss suffered by the Spanish Treasury, including omitted real estate properties abroad, is estimated at €1.06m (£907,000).
Papers filed by the Madrid Community Prosecutor’s office in 2020 claimed that Ancelotti concealed revenues “intending to avoid his tax duties towards the public treasury with no justification”.
The complaint stated that, in July 2013, Ancelotti allegedly sold his image rights for 10 years to an entity called Vapia Limited at a purchase price of €25million (£21.3m). A day later, Vapia Limited is said to have appointed the Italian as a proxy, “granting him the maximum powers of action to manage the image rights in exchange for the amount of one euro”.
Ancelotti, 64, coached Madrid between 2013-2015 before returning to the club in 2021. He is regarded as one of the most successful managers in the game.
The Athletic has contacted Ancelotti’s camp for comment.
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Explained: Carlo Ancelotti accused of tax fraud in Madrid
Will Ancelotti go to prison?
In most instances involving prominent sports figures, settlements are reached outside of court proceedings.
Speaking to The Athletic in 2020, IPS Law’s Chris Farnell — who acted on behalf of Cristiano Ronaldo on various commercial matters during the Portuguese’s time in the UK – said: “It can go further. The issue will be whether those services were genuine services provided by the company or not.
“If it does look like Carlo had central control, my advice would be to negotiate a position with the revenue. But if, as was the case with Ronaldo in this country and everything was established correctly, then I would stand my ground.”
In February 2019, Jose Mourinho faced allegations of owing €3.3m (£2.8m) to Spanish tax authorities from his tenure at Real Madrid in 2011-2012. Prosecutors claimed he established offshore entities to manage his image rights and conceal earnings from taxation.
He agreed to a prison term in Spain for tax fraud but avoided actual jail time. It is rare for Spain to enforce jail sentences of under two years for non-violent and first-time offenders. The former Manchester United manager instead paid an overall fine of €2.18m (£2.16m).
Lionel Messi and Ronaldo also had sentences for tax fraud relating to image rights changed to heavy fines in 2017 and 2019 respectively.
Ancelotti’s entourage see similarities between his case and that of Xabi Alonso, who was acquitted of tax fraud by a court in Madrid. He had been accused of evading tax from image rights between 2010 and 2012.
(Yasser Bakhsh/Getty Images)
