Stefano Gabbana (left) and Domenico Dolce could each face three years in jail if they are convicted of tax evasion charges. Sean Dempsey/PA Wire

Italian court clears way for Dolce and Gabbana €417m tax trial

The fashion designers may face a trial over their alleged failure to declare hundreds of millions in earnings from a holding company.

THE ITALIAN EQUIVALENT of the Supreme Court has overturned a previous decision not to allow fashion designers Domenico Dolce and Stefano Gabbana to stand trial for tax evasion charges.

The court rescinded a decision of the High Court not to permit the pair – the creators of the world-famous Dolce and Gabbana fashion house – to stand trial, along with five others, over allegedly cheating the Italian authorities out of €417m in tax revenue.

The case relates to the establishment of a holding company in Luxembourg in 2004, Grado Srl, which then purchased the rights to the ‘D&G’ and ‘Dolce & Gabbana’ brands from their original Italian parent.

The brands were sold for €360m, according to the Daily Telegraph, but prosecutors claim this was only around a third of their actual market rate – and suspect that the Luxembourg company may have actually paid the full market price of around €1bn, with the seven defendants accused of pocketing the difference.

The prosecutors also claim, according to Sky News Australia, that the Luxembourg company has been set up deliberately to avoid paying tax in Italy.

The original High Court action had been thrown out earlier this month by a judge who said the sale of the brands to Luxembourg was “a real operation” which corresponded to legitimate business needs.

Each of the defendants could face a €1m fine, on top of demands to repay the missing tax, and a three-year jail term if they are convicted.

The designers refute all the allegations, describing them as “absurd” and labelling the prosecutors’ valuation of their brands as “completely abstract”.

Stefano Gabbana tweeted after yesterday’s ruling to describe the tax authorities as “thieves”, but later deleted his post.