The Atlético Madrid striker has been handed a six-month prison sentence and a €543,208 fine for tax fraud -- although under Spanish law he will not serve jail time.
The 31-year-old pleaded guilty in a Madrid court on Thursday morning to evading €1.1 million in taxes on his image rights.
The charges relate to 2014, Costa signed for Chelsea in July of that year and a complex set of deals assigning his rights to numerous foreign companies.
Costa paid tax authorities the outstanding figure in full last year and will pay the additional €543,208 penalty. His prison sentence has been replaced by an additional fine, as is customary in Spain for jail terms of under two years.
"Diego Costa reached an agreement a few months ago with the prosecutor and has already paid the corresponding fine plus interest and the request for a prison sentence was withdrawn," an Atletico spokesman told Reuters on Wednesday.
"This week it is expected that an agreement will be ratified in court, as is mandatory."
The striker is the latest player to fall foul of Spanish authorities over tax evasion on image rights, with a number of high-profile cases in recent years.
Costa becomes the latest in a series of high-profile players to evade tax on image rights, following Cristiano Ronaldo in January 2019 and Lionel Messi back in 2017. Ronaldo agreed to hand over a total of €18.8m in fines and taxes and was given a 23-month sentence, substituted for another €365,000 payment. Messi was given a €2m fine and a 21-month jail term -- later replaced by an additional €500,000.