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The Arsenal ace appeared via video link in a Barcelona court and admitted to two counts of tax fraud.
The 27-year-old should have paid £864,795 (€983,443) during his time at Barcelona.
Sanchez avoided paying the tax by transferring his image rights through a company called Numidia Trading based in Malta.
He has already paid the money back but faces a hefty fine to avoid another court case similar to Lionel Messi.
Sanchez is expected to be handed a jail sentence however under Spanish law jail terms of under two years can be served on probation – so he is unlikely to serve time.
Messi was sentenced to 21 months in prison while Mascherano was sentenced to a year.
Sanchez’s Arsenal future is in the balance and he appeared frustrated when he was substituted on Saturday after scoring in the 4-0 win over Swansea.
Sanchez has 18 months to run on his contract and is demanding a huge increase on his £130,000-a-week wages.
He is looking for around £250,000-a-week to bring him up with the Premier League’s highest earners.