This tax perk that could save you thousands before it’s scrapped

One of the little known tax rulings in the Netherlands – soon to disappear – is the chance to “average” your salary across three years.

While some countries allow creative industries to do this, to account for unevenly spread commissions or sales, the Netherlands has been relatively unusual in offering this tax benefit to everyone. It means that if you had a period of unemployment, for instance, or a large bonus one year, you can level this out across three years and potentially get a tax refund.

“The measure has been scrapped and but you still have a chance because the three years that can still be submitted are 2022, 2023 and 2024,” explains a spokesman from Blue Umbrella, which helps thousands of expats with their tax affairs.

“The minimum that you can get back is around €500 but I have seen huge amounts, tens of thousands, €50,000. When people start to work or stop working, with the first year of their career or the last year, it is quite normal to have big changes in your income. So if that applies to you, it can be worthwhile to ask for averaging.”

From student to salary

So someone who, for instance, was a student in 2022 and 2023 but started work in 2024 on a good salary might find averaging over the three year period would bring them into a different tax band and give them a tax refund for 2024. Equally, someone who retired in one of the years but was highly paid before this and a top-rate tax payer could reap a large reward.

One important point: you can only do averaging once you have a definitive tax return (definitieve aanslag) accepted for all three years and you can only use each year once. So, if you have not done this averaging before, you should work out whether it’s in your best interests to count 2021, 2022 and 2023, for example, or another combination of years.

“You can submit the request, at the latest, 36 months after you have had the final definitive tax return from the three years,” said the Blue Umbrella spokesman. “So this means you could have a choice of several years.”

Fairer taxation

This tax break was originally introduced because it was more common in the past for people to have periods of unemployment between jobs and so it was considered fairer to assess their long-term income situation.

“It was about total income, so if you have a low income in one year and a high income in another but on average you are not really a wealthy person, then you should also have average taxes,” said the Blue Umbrella spokesman. “That was the reason in the past: it was a social system.”

Another thing that affects the income situation is buying a house, because home owners can deduct certain costs related to their own home (such as some of the mortgage interest and house buying costs) from their taxable income: this could have a huge effect on averaging.

Full year

One thing to bear in mind if you moved to the Netherlands or are deciding to leave the country: averaging only works over whole years so you cannot count a migration year in which you only worked for several months in the country. (Although there’s another tax option, the M-form, which can help you here).

It can be complex to work out what combination would be most beneficial for you, and you can only claim the averaging if you will get a minimum tax refund of €545. Blue Umbrella offers a service to do all of the work for you for €144.

“For Dutch people, this is regular business, although a lot of international people are surprised to hear about averaging,” said the Blue Umbrella spokesman. “But it can give tax refunds of huge amounts.”

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Categories: Alternative, Dutch News
Anton Nieuwenhuizen

Written by:Anton Nieuwenhuizen All posts by the author

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