Prosecutors seek nearly five years jail time for Carlo Ancelotti

The Prosecutor’s Office in Madrid is requesting four years and nine months in prison for Carlo Ancelotti as the Italian is said to have not paid the required tax during his first stint with Real Madrid from 2013 and 2015, despite being a resident in Spain. Ancelotti allegedly declared his earnings from his Real Madrid salary, but omitted earnings from his image rights.

The indictment alleges that Ancelotti signed an employment contract as head coach of Real Madrid on 4 July 2013 for the period from 5 July 2013 to 30 June 2016 “specifying in his remuneration for that period, in addition to the employment income, income derived from the transfer of image rights to the club”. It also specifies that from July 2013 the defendant began to work and reside in Spain. However, when the coach “prematurely” ended his spell with Real Madrid on 25 May 2015, he rented his home until October of that year, so that during 2015 “Spain was his main area of personal relations and economic interests”.

Image rights issues

The prosecution states that “in order to avoid taxation on the income from these image rights”, both those received by Real Madrid and other brands for various events, the coach resorted to a “complex” and “confusing” network of companies to channel the collection of image rights and “concealed the real beneficiary of the income from his image rights, so that neither he nor any of these companies would have to pay tax on the large amounts received in Spain or outside our country”.

Ancelotti, according to the Prosecutor’s Office, signed a private contract on 1 July 2013 in which he transferred his image rights to a company called Vapia Limited for a period of ten years and a fee of €25,000,000, “granting him the maximum powers of action to manage his image rights”.

Unnamed company

On 4 July 2013, according to the prosecution, Ancelotti signed a private contract with the club in which he ceded 50 per cent of his image rights to the sporting entity between 5 July 2013 and 30 June 2016. The other 50 per cent was held by an “unnamed” and “undetermined” company that acted in the name and on behalf of the Italian coach. That company turned out to be Vapia LLP, based in London, and not Vapia Limited, a company in the Virgin Islands, something that was not communicated to Real Madrid until a year later.

“In this way, the accused used Vapia LLP to formally present himself to Real Madrid as the owner of the image rights despite the fact that he did not formally own them, since the assignment contract of 1 July 2013 was with Vapia Limited,” the statement adds.

Ancelotti, according to the Public Prosecutor’s Office, submitted his self-assessment tax returns for personal income tax in due time, in which he stated that he was resident in Spain and where he stated that his address was a property in Madrid, and only recorded the remuneration received from Real Madrid for his personal work. However, “he omitted any income corresponding to his image rights (...) thus arriving at negative tax returns” with a negative balance of €39,575 in 2014 and €529,076 in 2015, amounts that were returned to him in both cases.

The Prosecutor’s Office states that the income derived from the transfer of image rights represented income of €1,249,590 in 2014 and €2,959,768 in 2015, without Ancelotti or the other two entities having paid tax on these amounts. In addition, the coach also omitted in his declarations the ownership of two properties located abroad. After making the corresponding adjustments, the Spanish Treasury calculated the loss suffered based on the income and revenue omitted and refunds obtained at €1,062,079 (€386,361 in the 2014 financial year and €675,718 in the 2015 financial year).