Audit Documentation Procedures: Distinguishing Abusive Practices from VAT Fraud under Kittel Jurisprudence

The article analyzes audit documentation procedures that distinguish between abusive practices and VAT fraud, focusing on the “knowledge or should have known” criterion from Kittel case law.
It presents a practical documentation framework based on International Auditing Standards to properly categorize cases and avoid unjustified criminalization.
VAT is a key revenue source but is vulnerable to abuse and organized fraud, with significant losses reported annually in the EU.
The Kittel decision introduced the loss of VAT deduction rights if the taxpayer knew or should have known about fraud, shifting some cases from administrative to criminal.
Auditors must both detect signs of artificiality or fraud and clearly document qualitative elements (intent, knowledge) to differentiate case categories and ensure proportionality.

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.