Q&A Income tax averaging
The Dutch averaging scheme has been abolished as of January 1, 2023. However, you can still apply for averaging one last time for the income years 2022, 2023, and 2024. We’ve put together this Q&A to help you understand what averaging is, who can still benefit, and how to apply before it’s too late. If you’re not sure whether averaging applies to you, this Q&A will help, and of course, feel free to contact us if you need any further assistance.
In this Q&A we answer the following questions:
- What is averaging?
- For which years can I still apply averaging?
- What are the conditions for averaging?
- How do I know if averaging is beneficial for me?
- How do I apply for averaging?
- What is the deadline to apply for averaging?
- Can I apply for averaging if I live or work abroad?
- What happens if I use a year that has already been included in a previous averaging request?
- What is the minimum amount for a refund through averaging?
- How can the TaxSavers help me with averaging?
1. What is averaging?
Averaging (in Dutch ”Middeling”) is a way to get a tax refund if your income varied significantly over a three-year period. You add up your taxable income for three consecutive years and divide the total by three. This gives you an “average income” for those years. Based on this, the Dutch Tax Authorities can recalculate how much tax you would have paid if your income had been the same each year. If this calculation shows you paid too much, you may be entitled to a refund.
2. For which years can I still apply averaging?
You can apply averaging for any block of three consecutive calendar years for which the income tax assessments have become final. Keep in mind that you must submit your request within 36 months after the last assessment in the chosen period has become final. The averaging scheme applied up to and including the 2024 tax year. This means that 2022, 2023 and 2024 is the last year you can use in an averaging calculation.
3. What are the conditions for averaging?
To qualify for averaging, several rules apply. You must select three consecutive calendar years, and the tax assessments for all three years must be final. This means you must have received the final tax assessments from the Dutch Tax Authorities for each of those years. Each year can only be used once in an averaging calculation. If you have already included a year in a previous request, you cannot use it again. The scheme only applies to Box 1 income (income from work and home). Income from Box 2 or Box 3 is not included. Finally, the request must be submitted in writing to the Dutch Tax Authorities. In the request, you specify the three years you want to average.
4. How do I know if averaging is beneficial for me?
Averaging is particularly interesting if your income fluctuated strongly between the three chosen years. By averaging, it’s as if you earned the same amount each year. If in reality your income was much lower in one year compared to another, you may have paid too much tax overall. Typical situations include taking a sabbatical, switching jobs, starting or stopping a business, or working fewer hours temporarily. Students who start working after graduation can also benefit. If your income was relatively stable across the three years, averaging usually won’t result in a refund. It mainly helps in situations with clear peaks and dips in your income.
5. How do I apply for averaging?
You can apply by sending a written request to the Dutch Tax Authorities. In your letter, specify which three years you want to average. The authorities will review your request and, if you qualify, refund the amount. You can handle this yourself or we can take care of the entire process for you.
6. What is the deadline to apply for averaging?
You have 36 months (three years) from the moment the final assessment of the last year in the chosen period has been issued. After that deadline, the right to apply for averaging expires. For periods ending in 2022, it’s important not to wait too long.
7. Can I apply for averaging if I live or work abroad?
Yes, you can, but there are extra conditions. You must have been a qualifying non-resident taxpayer for all three years and submitted an income statement to the Dutch Tax Authorities for each of those years. If you haven’t done this yet, you can request to have your tax assessment adjusted and submit the income statement afterwards. Living or working abroad does not exclude you from averaging, but these additional steps are required.
8. What happens if I use a year that has already been included in a previous averaging request?
That’s not allowed. Each year can only be included once in an averaging period. If you accidentally use the same year again, the Dutch Tax Authorities will reject your request. It’s therefore important to plan carefully which years you combine.
9. What is the minimum amount for a refund through averaging?
There is a threshold of €545. Only the amount above this threshold will be refunded. If your calculated benefit is less than €545, you will not receive a refund.
10. How can the TaxSavers help me with averaging?
We calculate whether averaging is beneficial for you, select the right three-year period, and handle the entire request process with the Dutch Tax Authorities. This way, you can be sure everything is done correctly, and without any hassle on your side.
TaxSavers is here to help
We hope this Q&A has helped you understand how averaging can benefit you. It’s a great opportunity to make sure you’re not paying more tax than necessary. At TaxSavers we’re happy to help you make the most of it.
If you’d like personal advice or assistance with your application, simply fill out our contact form or give us a call at 020-2170120. We’re here to help you make the most out of averaging for the last time!
Do you have questions about averaging or another tax-related matter?
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