My friend Peter has been working as a self-employed construction worker for a few years now. Due to both the corona crisis and the nitrogen crisis, his work and therefore his income have fluctuated greatly in recent years. For Peter, it could be interesting to make use of the averaging scheme. The averaging scheme? Yes, the averaging scheme!
Not very well known to many people, because the Dutch tax authorities do not actively promote this scheme. Peter had never heard of this scheme either.
Spreading the tax burden
The application of the averaging scheme implies that in case of widely fluctuating income, the tax burden is spread over three consecutive years. This can be done by recalculating the tax on the basis of the average income of those three years. This often results in a tax refund. The scheme is only applied upon written request and has to be substantiated with a calculation. For people like Peter, but also for many other professions with a highly fluctuating income, it is worthwhile to see if this scheme can be of any benefit.
What are the conditions of the averaging scheme?
The application of the averaging scheme concerns the income from box 1, the income from work and home. This is the income from employment or from your own business as a self-employed person. Any owner-occupied home value and mortgage interest deduction are also taken into account.
The averaging scheme can be applied for from the moment that the tax assessment has been irrevocably established. Please note that this is possible up to 3 years later. It is therefore important to be on time, otherwise you have bad luck…
If a certain tax year has already been part of a request for averaging, this tax year cannot be applied again in another averaging request. Therefore, it is important to get all the information right first, in order to determine the most favourable scenario for you.
- It is important to know that the tax authorities apply a threshold of € 545. Only if the amount of the request for averaging exceeds this threshold can you receive money back.
- A request for averaging can only be submitted in writing. The request for averaging must be accompanied by a calculation showing that the amount of the refund exceeds the threshold of € 545. It also has to be clear which tax years are concerned.
- After the request has been submitted, it can take up to 8 weeks for the tax authorities to issue a ruling.
Please note! The Dutch government wants to abolish the averaging scheme. The last period for which averaging can be requested is 2022 – 2024.
We are happy to help you if you have any questions about the averaging scheme. We can also assist you in preparing the necessary calculations. In this way, we can determine for you to what extent you can make use of the averaging provision and which scenario is the most favourable. On the basis of these calculations, we can also prepare and submit the written request for you. Please contact us at firstname.lastname@example.org or call +31 15 215 88 15.
And Peter? We made the necessary calculations for him and now he goes back to the construction site whistling…
R.R. (Rochard) Rajiv Narain
Junior Payroll Administrator (present: mo. to fr.)
+31 (0)15 820 00 32