Italian fashion designers Domenico Dolce and Stefano Gabbana have been handed suspended prison sentences of a year and eight months by a court in Milan for evading millions in taxes.

A judge ruled that the pair, who are the owners of the multinational fashion group, had sold their brand to a Luxembourg- based holding company in 2004 in order to avoid declaring more than €100m in royalties. They were also fined €500,000.

The widespread use by Italian business of holding companies registered in Luxembourg has been a target for tax authorities as Rome seeks to boost state coffers by bringing back onshore billions of euros estimated to be held in tax havens.

At the centre of the trial was the decision by the designers to create in March 2004 a Luxembourg-based holding company, known as Gado, which subsequently took control of the business.

Mr Dolce and Mr Gabbana, who were not present in court, have denied the charges and have said they intend to appeal against any conviction. They are unlikely to serve a prison sentence because of the length of the appeals process. (Copyright 2013 The Financial Times Limited)