real Madrid Coach in Court Over Alleged Image Rights Fraud

Carlo Ancelotti, the esteemed Real Madrid coach, is currently facing legal scrutiny in a Madrid court, accused of tax fraud. The proceedings began this Wednesday, placing him in the company of other high-profile figures like José Mourinho and Cristiano Ronaldo, who previously faced similar charges. Ancelotti’s case revolves around alleged irregularities concerning his image rights during his initial tenure with Real Madrid.

The Charges: Millions in Unpaid Taxes

The prosecution is seeking a prison sentence of four years and nine months for the 65-year-old Italian coach. The allegations center on Ancelotti’s failure to properly declare over one million euros in income related to image rights during 2014 and 2015, his first stint managing Real Madrid (2013-2015). He later returned to the club in 2021 and remains in charge.

The trial commenced at 10 am (08h00 GMT) in Madrid, with the court scheduling two days for the proceedings. However, there is a possibility that a resolution could be reached sooner through an agreement between Ancelotti, the Prosecutor’s Office, and the Tax Administration.

According to judicial documents, Ancelotti reportedly acknowledged the facts during the investigation phase.

Addressing the media before a recent League match, Ancelotti expressed his willingness to cooperate with the court. I am not worried. It bothers me that they say that I have disappointed,but I will declare with illusion, he stated.

The Alleged Evasion Scheme: A Web of Trusts

Spanish tax authorities claim that while Ancelotti declared his salary as Real Madrid coach, he omitted income derived from image rights and other sources, including real estate holdings. The Public Ministry alleges that these undeclared image rights amounted to 1.2 million euros in 2014 and 2.9 million euros in 2015.

Prosecutors argue that Ancelotti’s omissions were deliberate, accusing him of utilizing a complex and confusing network of trusts and shell companies to channel image rights revenue. This structure allegedly simulated the assignment of his rights to entities with lacking real activity located outside of Spain, with the intention of pursuing opacity for the Spanish Public Treasury, according to the Prosecutor’s Office.

Precedents: Football Stars and Tax Troubles

Ancelotti is not the first high-profile figure to face tax-related legal battles in Spain. Several football stars and celebrities have encountered similar issues, often reaching settlements to avoid imprisonment.

• Lionel Messi: The Argentine superstar was sentenced to 21 months in prison in 2016 for defrauding 4.1 million euros. Though, he avoided jail time due to Spanish laws allowing the suspension of sentences under two years for first-time offenders. Messi also paid over 5 million euros in fines and interest.
• Cristiano Ronaldo: The Portuguese forward pleaded guilty to tax fraud in 2018, admitting to defrauding 5.7 million euros.he paid a fine of 18.8 million euros and received a two-year suspended sentence.
• José Mourinho: Ancelotti’s predecessor at Real Madrid, Mourinho, received a one-year suspended sentence after admitting to tax fraud in 2019.
• Shakira: The Colombian singer reached an agreement in November 2023 to avoid trial for tax fraud, accepting a three-year suspended sentence and a fine of 7.3 million euros for defrauding 14.5 million euros between 2012 and 2014.
• Xabi Alonso: In a case similar to Ancelotti’s,the former Real Madrid player was accused of tax fraud related to the transfer of his image rights. However, Alonso declined a settlement and was ultimately acquitted.

image Rights and Tax Optimization: A Common Practice?

The use of image rights companies to optimize tax liabilities is a common practice among high-earning athletes and celebrities. However, Spanish tax authorities have increasingly scrutinized these arrangements, leading to numerous legal challenges. The core issue often revolves around whether these companies have genuine economic substance or are simply used as vehicles for tax evasion.

The outcome of Ancelotti’s trial could have notable implications for other individuals and entities involved in similar arrangements. The case highlights the ongoing efforts by Spanish authorities to combat tax fraud and ensure that high-income earners pay their fair share of taxes.