The Dutch tax office has recently issued the 2018 preliminary assessment. That is the opposite of the 2018 preliminary refund. Do I need to pay this assessment?
2018 Preliminary refund
This is the more nice assessment in which the Dutch tax office announces what amount they are going to pay out to you during the 12 months of the year 2018. Such a payment is done to you, if you own a house that is your main residence. That is the most common cause of such a refund.
2018 Preliminary assessment
The tax office monitors who pays what. The 2016 income tax returns have been filed and some of them showed an amount due to the Dutch tax office. Based on that 2016 income tax return, the tax office makes now already a claim for the year 2018.
Why would you have paid income tax in 2016?
- You had a so called one man company, made a profit, hence you paid income tax
- You had more than one employer in this year, hence you paid additional income tax
- You had more taxable wealth in Box 3 than the tax free amount, hence you were due income tax
That are the most common causes of tax payers to be due income tax.
Why pay now already?
That is the most asked question. The year has not even started, owners of a so called one man company cannot foresee if they will make a profit at all, let alone pay now already tax over a profit still to be made.
This is different with Box 3 wealth tax owners, their assets are taxed based on the value of January 1, 2018. Hence that assessment is rather accurate to be calculated.
The philosophy of the tax office is in line with that of regular employees. An employee is not paid his gross salary in his bank account, so he can pay the tax after the year has finished. The fear with the tax office is that the employee spends more than he can afford and therefore is not able to pay for the income tax. That is the reason why on a monthly basis the wage tax is being collected, so that the employee is not due any tax at the end of the year, should he only have had that employment.
With entrepreneurs this philosophy also applies. Most entrepreneurs pay the full amount of income tax in the year after the tax year has finished. But what if the income in the following year is not sufficient due to any reason? Then the tax of the previous year is not paid as money is most likely already spend. To avoid this problem, the preliminary assessment is issued.
Update the 2018 preliminary assessment to nil
The number one question asked is to reduce the amount to nil as nobody knows or can know the profit is indeed made by the entrepreneur.
If the situation is such that it is very unlikely the company will make a profit, this is an option. However, should it turn out by the end of the year that this year was nearly no difference than previous years, both the entrepreneur and the tax advisor assisting him can be prosecuted for that. The Dutch tax office was so clever to update legislation in this field in 2016 to prevent boogie nil requests. It was already in legislation that this could not be done, but it has been updated to a more severe ‘crime’.
Is the 2018 preliminary assessment a problem?
Yes it is. As there will always be a year that you have to pay both the tax of the past year and then also more or less at the same time the tax of the current year. That can be too much and it is difficult to cope with that. We would not know a solution for that. But once you have gone past this moment it is actually very pleasant to pay the tax already for the current year. If you cannot pay the tax, apparently you are not doing very well, and then you are entitled to reduce the assessment. And vice versa of course.
Orange Tax Services
We can assist you with the preliminary assessment and preliminary refund. Feel free to contact us.