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Though the designers have denied any wrongdoing, they could face a court trial and, if found guilty, would be personally liable for more than $1 billion in unpaid taxes and fines, according to the paper.
The case, which has been ongoing since 2008, reportedly stems from the 2004 sale of the Dolce & Gabbana and D&G labels to their Luxembourg-based holding company, Gado Sri.
The designers reportedly may have the option to settle the case, though maintaining their innocence will involve a lengthy courtroom trial.
"It's a paradox," the designers said in a 2009 statement.
"Since when does one have to pay taxes on money one never actually collected.
"It's an absurd demand based on a completely abstract calculation.
"This higher taxable sum...is a virtual figure we have never received, the result of a theoretical accounting exercise."
The duo -- who now face a three-year prison sentence or a fine of around $1.3 million, according to WWD -- claim that Italian authorities have overestimated the value of their companies at the time of the sale.
Gado Sri is also under investigation for allegedly owing $175 million in unpaid taxes and fines, the paper reports.
Italian tax authorities have targeted several other fashion labels in recent years, including Valentino, Roberto Cavalli, and Salvatore Ferragamo, the latter two eventually being acquitted.
Mama mia! These guys aren't messing around. OMG!!!
