Dolce & Gabbana Fined $440M

MILAN — Italy’s Tax Commission has fined Dolce & Gabbana 343.4 million euros, or $440.2 million at current exchange, plus interest.

The decision confirms a first degree sentence in November 2011 and denies an appeal by Domenico Dolce and Stefano Gabbana. The designers may still avoid the fine, if they decide to appeal and wait for a third degree sentence. The fine by the Tax Commission is separate from the ongoing trial in a Milan courtroom, but both stem from the same accusations put forward by Italy’s Internal Revenue Agency. Dolce and Gabbana, who are accused of omitted and unfaithful earnings declarations, have always denied the charges.

The designers were charged with alleged tax evasion totaling 416 million euros, or $533.2 million, related to the 2004 sale of the Dolce & Gabbana and D&G brands to the designers’ Luxembourg-based holding company, Gado Srl. The Italian tax police reportedly consider Gado essentially a legal entity used to avoid higher corporate taxes in Italy.

The designers were originally absolved of the claims by a lower court in April 2011, but the Italian Supreme Court in November 2011 overturned that decision, saying that tax avoidance, or tax mitigation, on an earnings declaration is a criminal offense under the law.

A separate criminal probe into supposed tax irregularities at the Dolce & Gabbana Group was part of the case dismissed in April 2011. Those accusations address unpaid taxes of 200 million euros, or $258.7 million.

In January, during the ongoing trial, a former employee of the Internal Revenue Agency confirmed that the designers paid 90 million euros, or $121 million, in taxes and fines in 2007 for 2004-07 as part of a separate probe.