Milan had qualified for the group stages of this season's Europa League after finishing sixth in Serie A.

Uefa said the club, which spent £200m on transfers last summer after a takeover, breached rules around requirements for clubs to break even.

Milan said they would appeal to the Court of Arbitration for Sport.

Before the verdict, Milan released a video on Twitter saying they expected "fairness, rulings based on facts and equal rules for all" from Uefa.

The statement said the club are "ready to pay for the errors made in the past" and "have the utmost respect for the rules, but we expect equality".

On Wednesday the club added: "AC Milan has instructed its legal team to appeal the decision seeking a prompt review of the ruling."

Why did Milan face sanctions?

The Italian club was owned by former Italian prime minister Silvio Berlusconi from 1986 until it was sold to a Chinese consortium for 740m euros (£648m) in April 2017.

The club then went on a £200m spending spree in the summer, bringing in Leonardo Bonucci from Juventus for £35.1m and Andre Silva from FC Porto for £33.6m. It was the first time since 2002 the club had broken the £30m barrier for a player.

Uefa referred the case to its adjudicatory body to make a ruling as it said there "remained uncertainties" following an investigation into the Serie A club's financial affairs.

The "uncertainties" were said to relate to the refinancing of a loan due to be paid back in October 2018.

Uefa's financial fair play rules were brought in to stop clubs running up huge debts, and they can be punished if they spend more money than they earn.

Sanctions for breaching the rules range from warnings and reprimands to points deductions and transfer embargoes.

What did the club say?

Milan said the 2017 summer spending spree "renovated the squad, putting together the youngest side in Serie A".

"We invested more than 200m euros to open a new cycle," the statement added. "One year later, the value of the investment is unchanged and the market value of the squad is the third in Serie A."

The club says the first team's salaries are below 60% of revenues "thanks to investments mainly targeted on young players with a view to the future".

Milan also say the club are on course to meet the targets set in their business plan presented to Uefa, have made investments in the training ground, will field a women's team next season, have adhered to B-team initiatives and will participate in the next Lega Pro season with their Under-21 side.

"We immediately focused to ensure greater efficiency to our organisation, to manage the club in an upstanding, transparent and responsible way," the statement said.

"We lowered the operating costs by 6m euros. Our majority shareholder increased the capital over the course of a year by 88m euros (not loans), raising the value of the club's assets. The club is actually aiming for a more stable and thriving asset.

"All of these facts are inspired by a single mantra: working for the future of Milan, a valuable asset to the world of football."