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The Croatian captain was charged with perjury in March of this year relating to a tax fraud case against former Dinamo Zagreb director Zdravko Mamic, which could have resulted in a five-year jail term for the player.
However, the court announced on Monday – the same day that Modric was crowned as the 2018 Ballon d’Or winner – that the indictment was to be dropped.
“There is not enough evidence that he (Modric) committed the criminal offence of perjury,” court spokesman Kresimir Devcic told AFP.
The allegations against Modric stem from testimony he gave in June of last year regarding Mamic and his role in Modric’s 2008 transfer from Dinamo Zagreb to Tottenham Hotspur.
Prosecutors said that Mamic embezzled money by inventing fictitious deals related to the transfers of players from Dinamo Zagreb to other clubs.
Liverpool’s Dejan Lovren, who played for Dinamo between 2006 and 2010, has also be implicated in the scandal.
Mamic, along with three others, were found guilty of charges of abuse of power and corruption. Dinamo, the reigning Croatian champions, were forced to pay $17.3 million as a result.
Mamic was sentenced to six and a half years in jail, though he is currently outside of Croatia’s legal jurisdiction in neighboring Bosnia.
He has long been considered a controversial figure in Croatian football, having come under scrutiny by authorities on several occasions in the past including for suspicions of match-fixing and threatening journalists.