As an expat in the Netherlands, you sometimes you hear people talking about the preliminary tax assessment. What is that, what do they take into account, how do they work, is this beneficial for me and when do you request it are questions we often get.
What is a preliminary tax assessment?
As the name states, it is a tax assessment which is calculated preliminary. A preliminary tax assessment is requested during the year it relates too. This means that this request takes into account expectations and calculations as the final figures are not known yet.
What do they take into account?
A preliminary tax calculation can take into account similar information as the annual income tax return. Such as your income, your Dutch main residence and the deductible costs. Also your assets, if you are not entitled to the 30% ruling.
A preliminary tax assessment can also be filed for one man companies to pay the tax in advance. A preliminary tax calculation can also be based on part of the information. For instance only relating to the income from the one man company, only relating to the Dutch property or only relating to the assets.
How does it work?
The preliminary tax assessment results in either too pay tax or a tax refund. This result will be divided over the remaining months of the year it relates too when filed. Meaning that you will pay or receive the amount in monthly instalments.
The outcome of a preliminary tax assessment is settled with the outcome of the annual income tax return relating to the same year. For instance, the 2021 preliminary tax assessment will be settled with the outcome of the 2021 annual income tax return.
The preliminary tax assessment paid out during the year for EUR 4.800 due to mortgage deduction. At the end of the year it turned out you either paid less interest, or the threshold was higher. The income tax return comes to EUR 4.600 refund. As you already received EUR 4.800, you need to pay back to the tax office EUR 200.
Is the preliminary assessment beneficial for me?
This depends on your personal preference. The final tax result will remain the same. The biggest difference is when you pay/receive the amount. The preliminary tax assessment results in monthly instalments and the annual income tax return results in a one time instalment/payment. Some need the monthly up front refunds to pay for the costs of the mortgage.
In case of a one man company we recommend you to already pay upfront the income tax in instalments. The one year you earn more than the other. The tax office also prefers you to pay as you go, hence the tax office can levy a preliminary assessment with you without you asking for it.
A preliminary tax calculation is also a tool to calculate your tax obligations.
When do you request for the assessment?
You can file your preliminary tax assessment during the year it relates too. When you expect to receive a tax refund, for instance relating to the deductible costs of your property. You can also request this if you are expecting having to pay tax at the end of the year, for instance when you have your own company or have assets exceeding the threshold.
Tax is exciting
We think tax is exciting. We are excited to claim back up front some tax already for you. Monitoring the preliminary refund we recommendrefund. The tax office automatically converts the refund to the next year, but maybe you are entitled to less refund in that year. Paying back tax is not exciting.
The author of this article is Kelly and Kelly is eager to assist you with your tax assessment.