Gates is expected to be the government's star witness in its case against Manafort.
Gates, who also was an official on Trump's campaign, pleaded guilty in February to lying to investigators and conspiring to defraud the United States and agreed to cooperate in Special Counsel Robert Mueller's ongoing investigation into whether Trump's campaign colluded with Russian Federation.
Gates admitted lying to hide the accounts and said that, under Manafort's instructions, he would classify any earnings as either a loan or income with the aim of reducing Manafort's tax burden.
He said he was aware Manafort was acting as an unregistered foreign agent in lobbying for Ukraine.
He testified that Mr Manafort had directed him to lower taxable income by reporting overseas income as loans, according to USA media.
Manafort's attorneys have signaled they will seek to blame Gates and have accused him of embezzling millions of dollars from Manafort.
Rick Gates, Manafort's former partner in crime (literally, it turns out), took the stand to detail the many shady sides of the worldwide lobbying business he helped the ex-superlobbyist run for years.
Gates did not make eye contact with Manafort as he took the stand wearing a yellow tie and navy blue suit.
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Gates said he repeatedly lied to hide the bank accounts and, at Manafort's direction, he would classify money that came in as either a loan or income to reduce Manafort's tax burden.
Those admissions are likely to become a focal point for Manafort's defence team when he is cross examined on Tuesday. Manafort is charged with 18 counts of tax and bank fraud.
Trump hasn't tweeted about Manafort since the first day of the trial last week, and the trial itself is not about the work Manafort did on the campaign.
The jury heard how Mr Manafort made tens of millions of dollars for political work with pro-Russian politicians in Ukraine.
Manafort, a veteran lobbyist, has tried to get the financial charges against him dismissed and arguing that Mr Mueller has a "blank check" that he "has cashed, repeatedly". When a banker asked about $1.5 million debt that Manafort's company owed to a Cyrus entity called Peranova Holdings Limited, Gates produced a backdated document showing it was forgiven.
But Ms Laporta's testimony raised the stakes for Mr Manafort, legal experts said.
Gates, who also served in a senior role in Donald Trump's presidential campaign, read off the names of more than a dozen shell companies he and Manafort set up in Cyprus, St. Vincent and the Grenadines and the United Kingdom to stash the proceeds of Manafort's Ukrainian political consulting work.
This courtroom sketch depicts Rick Gates, right, answering questions by prosecutor Greg Andres as he testifies in the trial of Paul Manafort in Alexandria, Va. Manafort attorney Kevin Downing will cross-examine Laporta, who is testifying under an immunity agreement because she feared prosecution for perjury or false statements. One accounting trick saved Manafort $US500,000 in taxes, she said.
Asked whether the money in the accounts was Manafort's income, Gates said, "it was". Manafort listed the income as a loan in 2012 in order to reduce his taxable income, according to Gates. But while Laporta acknowledged that she regularly communicated with Gates, she said she believed Manafort was in the know.