MILAN (REUTERS) - Fashion designers Domenico Dolce and Stefano Gabbana were each given a reduced, suspended sentence of 18 months in jail on Wednesday for a conviction on charges of hiding hundreds of millions of euros from Italian tax authorities.

Italy's appeals court upheld a verdict issued last June against the pair on charges of using Luxembourg holding company Gado to avoid paying taxes on royalties of about 1 billion euros (S$1.74 billion). The sentence was reduced from 20 months because the statute of limitations applied to certain facts in the case.

A lawyer for Dolce and Gabbana, who have always denied any wrongdoing, said they would appeal the decision.

"I am speechless. We are all shocked. The judgement is inexplicable and we will appeal," Mr Massimo Dinoia said after the judgement.

A Milan prosecutor had asked the court in March to clear the pair, who - in a protest last year at being "pilloried" - closed the Milan shops where they sell clothes and accessories inspired by Dolce's native Sicily.

The previous decision by a lower court handed the duo suspended jail sentences of 20 months each and imposed a fine of up to 10 million euros over avoidance of the payments in Italy, where corporate taxes are among the highest in Europe.