Ancelotti denies tax fraud claims

BARCELONA, Spain (AP):

REAL MADRID coach Carlo Ancelotti has denied wrongdoing after Spanish state prosecutors accused him of tax fraud, claiming that he used shell companies to hide parts of his income during his first stint at the club a decade ago.

Prosecutors in Madrid said yesterday that they are accusing Ancelotti of two counts of tax fraud and are seeking a prison sentence of four years and nine months. They accused the Italian coach of having defrauded 1 million euros in 2014 and 2015 by only declaring the income he received from Real Madrid while omitting his income from image rights.

Ancelotti addressed the accusations for the first time after the team’s 1-1 draw against Leipzig in the Champions League yesterday.

He said the issue was related to whether he should have been considered a legal resident at the time.

“The tax authority says that I was a resident at the time, and I don’t think that I was a resident,” Ancelotti said after his team sealed a spot in the Champions League quarterfinals.

“I already paid the fine – the money is with them – and now the lawyers are talking to try to find a solution. I’m convinced that I’m innocent, that I was not a resident in 2015, and they think that I was a resident. Let’s see what the judge says.”

Many professional players and managers set up a company that owns the rights to use their name and image for commercial purposes. But prosecutors claim that Ancelotti set up a “confusing” system of shell companies to hide his extra earnings. Ancelotti allegedly used companies “lacking any real activity” based outside Spain “so that neither he nor the mentioned companies had to pay taxes on the large sums earned in Spain or outside our country,” the prosecutors said. One of the companies was based in the Virgin Islands.

They said Ancelotti did not declare earnings related to image rights that reached 1.2 million euros (US$1.3 million) in 2014 and nearly 3 million euros (US$3.2 million) in 2015, and also omitted declaring two properties he owned abroad. They said the coach ended up receiving tax refunds of nearly 40,000 euros (US$43,600) for 2014 and 530,000 euros (US$578,000) for 2015.

The 64-year-old Ancelotti coached Madrid from 2013-15 before rejoining the club in 2021.

Ancelotti is one of football’s most successful coaches. He is the only coach to have won the Champions League four times, twice with Madrid and twice with AC Milan, and the only coach to have won domestic league titles in England, Spain, Italy, Germany, and France.

He is the latest in a string of major football profiles to face a crackdown by Spanish authorities over unpaid taxes although none have actually been sent to prison so far.

Former Madrid coach Jose Mourinho received a one-year suspended sentence after reaching a guilty plea for tax fraud in 2019. Star players Lionel Messi and Cristiano Ronaldo – among others – have also been found guilty of tax fraud in Spain. Similar to Ancelotti, Mourinho, Ronaldo, and Messi were also accused of using shell companies outside Spain to hide revenue from image rights.

Ronaldo agreed to pay a fine of nearly 19 million euros (then US$21.6 million) in 2019 and was handed a two-year suspended sentence that he didn’t have to serve.

Messi and his father were found guilty of defrauding tax authorities of 4.1 million euros (then US$4.6 million) but also avoided a jail sentence by paying hefty fines.

In Spain, a judge can suspend a sentence of less than two years for first-time offenders.

Many of those accused of fraud reached deals with the tax authorities and accepted guilt to reduce their sentences.

The club did not immediately respond to a request for comment on the accusation against Ancelotti.