Prosecutors believe the Croatian evaded €870,728 ($1.04 million) on revenue from his image rights in 2013 and 2014 via a shell company set up in Luxembourg.
On Tuesday, he gave a court in Alcobendas near Madrid, which is in charge of his case, evidence that he paid tax authorities close to €1 million on January 4th — the sum he allegedly evaded plus interest.
The 32-year-old Croat, who joined Madrid from Tottenham Hotspur for a reported fee of £30 million ($40.5 million) in 2012, paid the money “voluntarily,” the judicial source, who refused to be named, told AFP.
Judicial authorities are still investing financial holdings belonging to the player in the Isle of Man, on which Modric refused to comment in court.
Modric is just the latest in a series of star players based in Spain to be accused of tax fraud on income related to image rights in the past few years.
In November, Madrid left-back Marcelo admitted to a €490,917 tax fraud via his image rights in 2013.
Real Madrid's all-time leading scorer Cristiano Ronaldo appeared in court in July over accusations he evaded €14.7 million worth of tax between 2011 and 2014.
Barcelona duo Lionel Messi and Javier Mascherano received 21-month and one-year suspended sentences respectively after being found guilty of tax fraud over their image rights in 2016.
However, five-time World Player of the Year Messi's sentence was later replaced by a €252,000 fine.