Lawyers argued king’s sister should be spared trial as she had already suffered during inquiry into husband’s business dealings

A judge in Spain has rejected an appeal lodged by Princess Cristina’s legal team, paving the way for the sister of King Felipe VI to stand trial on charges of tax fraud this year.

Last month the investigating magistrate José Castro indicted Cristina on two counts of being an accessory to tax fraud, making the 49-year-old the first Spanish royal ordered to stand trial since the monarchy was restored in 1975.

Castro set a court bond of €2.7m (£2.1m)and specified that his decision to put Cristina on trial could not be appealed. The lawyers representing the princess lodged an appeal anyway, arguing that she had the right to do so under the constitution.

They said Cristina should be spared having to stand trial as she had already suffered tremendous personal and public consequences during the high-profile three-year investigation. But on Friday Castro held his ground, refusing to admit the appeal.

The case against the princess stems from the business dealings of her husband, Iñaki Urdangarin, who faces charges of money laundering and fraud. Urdangarin, a former Olympic handball player, ran a charitable foundation called the Nóos Institute, which allegedly embezzled €5.8m in public funds.

As Cristina was a board member of the foundation and the couple jointly owned a separate company, Aizoon, suspected of being used as a front to launder money, Castro noted on several occasions during his investigation that it would have been difficult for Urdangarin to engage in the alleged activities without his wife’s knowledge. She has denied any wrongdoing.

The ongoing inquiry has cast a cloud over the Spanish monarchy as it struggles to regain popularity after a raft of scandals in recent years. As part of the effort to modernise its image, King Juan Carlos abdicated last year in favour of his son Felipe.

As he began his reign, Felipe promised an “honest and transparent monarchy” – a vow that has been challenged by the judicial investigation into his sister’s activities. On Friday a spokesperson for the royal family declined to comment on the latest development, pointing only to comments made last month stressing the household’s “total respect for judicial decisions”.

As the threat of a trial looms larger for Cristina, the Spanish government has sought to distance itself from the royal, who is sixth in line to the Spanish throne. The prime minister, Mariano Rajoy, who said last year that he was “absolutely convinced that things will go well for her”, changed tack in December, saying that he could not get involved.

The parliament spokesperson for hisrightwing People’s party, Rafael Hernando, took things one step further, telling El Mundo newspaper last month that “Cristina should reflect on whether she should renounce her rights of succession”.