Arsenal forward Alexis Sanchez has admitted to defrauding Spanish tax authorities of €983,443 (NZ$1.47 million) during his tenure with Barcelona.

Giving evidence via video link from London, Sanchez "recognised a tax error which he has settled with the Spanish Treasury," a judicial source said, according to AFP.

The 28-year-old Chilean's confession may see him serve a non-custodial prison sentence along with fines.

Sanchez admitted that his tax declarations for 2012 and 2013 had not included profits from his image rights, which transited through a company based in Malta.