Accounting
Bookkeeping
Taxes
Income Averaging or Loss Carry-Forward: Which Is Better for You?
Not sure whether to use middeling or loss carry-forward? Find out how these Dutch tax rules differ and which one could reduce your bill the most.
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15 mins
Intro
Dutch tax law includes several mechanisms designed to reduce the impact of fluctuating income, but two of the most misunderstood are income averaging (middeling) and loss carry-forward (verliesverrekening). Although both can reduce your overall tax bill, they solve very different problems and follow completely different rules.
In 2026, understanding the distinction is more important than ever. Income averaging is a closing door, with only one transitional period remaining. Loss carry-forward, on the other hand, remains a permanent feature of Dutch tax law for both individuals and companies. Knowing which rule applies to your situation, and whether you can benefit from one or both, could result in a significant tax refund or lower future tax liability.
Two Tools, One Problem: When Your Income Is Not the Same Every Year
Dutch income tax is progressive. The more you earn, the higher the percentage of tax you pay on part of your income. As a result, someone earning €20,000 in one year and €80,000 the next may pay more total tax than someone earning €50,000 in both years, even though their total income across the two years is identical.
This creates a disadvantage for entrepreneurs, freelancers and employees whose income fluctuates significantly from year to year.
Dutch tax law contains two mechanisms that help reduce this structural disadvantage, but they work in fundamentally different ways.
Income averaging (middeling) smooths your taxable income across a fixed historical period. If your income fluctuated substantially during that period, you may qualify for a one-time tax refund.
Loss carry-forward (verliesverrekening) works differently. Instead of averaging income, it offsets an actual tax loss against profits from another year, directly reducing the tax payable in that year.
The critical distinction in 2026 is this:
Income averaging is a closing opportunity. Only one final transitional period remains.
Loss carry-forward is an ongoing right. It continues to exist as a permanent mechanism within Dutch tax law.
If your income varies from year to year, understanding how much tax you pay under the Dutch progressive tax system helps explain why both of these relief mechanisms exist in the first place.
Income Averaging: The Last Window and Who Can Still Use It
The Dutch middelingsregeling was abolished from 1 January 2023 for all new averaging periods.
However, the transitional legislation left one final opportunity to submit a claim.
The only remaining claimable period is the fixed three-year block consisting of:
2022, 2023 and 2024.
No earlier or later combinations are still permitted.
The remaining conditions are straightforward.
Condition | Detail |
Last claimable period | 2022, 2023 and 2024 only. No other combination exists. |
Eligible income | Box 1 income only: employment income, business profit (IB) and DGA salary |
Prerequisite | Definitive tax assessments (definitieve aanslagen) must exist for all three years |
Refund threshold | €545. No refund is paid below this amount |
Request deadline | Within 36 months after the 2024 assessment becomes onherroepelijk |
Submission | Written request to the Belastingdienst. No official digital application form exists |
Box 2 dividends | Never included. Dividends are Box 2 income and cannot be averaged |
One of the biggest misconceptions is that income averaging is already "too late."
For many entrepreneurs, the opposite is true.
The request period only starts once the 2024 definitive tax assessment has become onherroepelijk, which generally happens six weeks after the assessment date if no objection is filed.
Many founders only received their final 2024 assessment during late 2025 or even 2026.
That means 2026 is exactly when many entrepreneurs can submit their application for the first time, not when the opportunity has already expired.
Before assuming you no longer qualify, check the date on your 2024 assessment and calculate when your 36-month application window actually ends.
Entrepreneurs who recently transitioned from employment into self-employment after starting a company in the Netherlands are among the groups most likely to benefit from these final transitional rules because their taxable income often changed significantly during the 2022–2024 period.
Who Actually Benefits From Income Averaging?
Income averaging only produces a tax refund when the difference between your actual tax paid and the recalculated average exceeds the €545 refund threshold.
In practice, that means the larger your income fluctuated between 2022 and 2024, the greater the chance that income averaging will produce a meaningful refund.
The reason is simple.
Dutch Box 1 income tax is progressive.
When a large portion of your income falls into one particularly successful year, you pay proportionally more tax than if that same income had been spread evenly across several years.
Income averaging recalculates what your tax would have been if your Box 1 income had been identical in all three years.
The situations most likely to qualify include:
A transition from employment into self-employment, where one year contained little or no entrepreneurial income.
A ZZP entrepreneur who experienced a particularly strong final year before deciding to convert a ZZP to a BV.
A one-off consulting assignment, project or bonus that pushed one year's taxable income significantly higher than normal.
A DGA whose salary started relatively low in 2022 before increasing substantially by 2024.
Periods affected by parental leave, illness or a sabbatical.
The calculation itself is relatively straightforward.
First, the taxable Box 1 income from all three years is added together.
That total is then divided by three.
The tax that would have been payable on this average income is recalculated for each year and compared with the tax that was actually paid.
If the resulting refund exceeds €545, you may qualify for income averaging.
The Belastingdienst performs the official calculation after receiving your request.
Before submitting an application, however, making a rough estimate helps determine whether pursuing a claim is worthwhile.
One important point for company directors is that DGA salary qualifies, while dividend income never does.
This distinction often surprises founders.
A DGA who received a relatively low salary during the early years of their BV, followed by a significantly higher salary in 2024, may still qualify because salary is taxed in Box 1.
Dividend distributions, however, are taxed in Box 2 and are completely excluded from the income averaging calculation.
When deciding how much salary versus dividend to take from your company, it's therefore useful to understand the differences between DGA salary vs dividend, as only salary can ever form part of an income averaging request.
Loss Carry-Forward: The Permanent Tool With Different Rules for IB and VPB
Unlike income averaging, loss carry-forward remains a permanent feature of Dutch tax law.
If your business makes a tax loss, that loss does not necessarily disappear.
Instead, it can usually be offset against profits from another year, reducing the amount of tax payable.
The exact rules depend on how your business is taxed.
Entrepreneurs operating as an eenmanszaak or VOF fall under IB (income tax).
Companies operating as a BV fall under VPB (corporate income tax).
Although both systems allow losses to be offset, the rules differ significantly.
Aspect | IB (eenmanszaak, VOF) | VPB (BV) |
Carry back | 3 years | 1 year |
Carry forward | Maximum 9 years | Unlimited (since 2022) |
50% limitation | Does not apply | Applies above €1,000,000 taxable profit |
Cross-income offset | Box 1 losses offset Box 1 income only. Never Box 2 or Box 3. | Not applicable. VPB has no box system. |
Unused losses | Expire permanently after 9 years | Never expire under carry-forward |
For sole traders, the nine-year carry-forward limit is often the most important planning consideration.
Imagine a ZZP entrepreneur who incurs substantial losses during the first years of building a business.
Those losses can certainly reduce future tax, but only if sufficient Box 1 profit is generated within the following nine years.
Any unused balance disappears permanently.
For a BV, the situation is different.
Losses can be carried forward indefinitely.
The only significant restriction applies once taxable profits exceed €1,000,000, where only part of those profits can be offset by carried-forward losses in a single year.
For founders expecting a long route to profitability, this represents one of the structural tax advantages of operating through a BV rather than remaining a sole trader.
If you're deciding which legal structure best supports your long-term growth strategy, comparing a BV or sole trader helps explain why these different loss relief rules can influence that decision just as much as tax rates themselves.
A Worked Example and the Provisional Loss Relief Tool
The easiest way to understand the difference between income averaging and loss carry-forward is to see how both mechanisms can apply to the same entrepreneur.
Although they address different situations, they are not mutually exclusive.
In some cases, a founder may benefit from both.
Consider the following example.
Founder Profile
A founder leaves employment during 2022 and starts a ZZP sole proprietorship.
Their taxable Box 1 income develops as follows:
2022: €28,000 (part employment, part business income)
2023: -€6,000 (loss due to start-up investments)
2024: €72,000 (strong profitable year)
The question is:
Which tax relief mechanism should be used first?
The answer is loss carry-forward (verliesverrekening).
Because 2023 produced an actual tax loss, that loss is first offset against positive Box 1 income from previous years according to the normal carry-back rules.
This immediately reduces tax already paid in those earlier years and may generate a refund.
Once the loss has been processed, the adjusted income pattern can still be reviewed for income averaging.
Even after loss relief, the difference between the lower-income years and the strong 2024 result may remain large enough to exceed the €545 refund threshold.
That means one entrepreneur can potentially benefit from both mechanisms.
The sequence is important.
Apply loss carry-forward or carry-back first.
Review the adjusted Box 1 income for income averaging.
Submit an income averaging request if the recalculated refund still exceeds the threshold.
The Cash Flow Tool Almost Nobody Talks About
One of the least understood features of Dutch tax law is provisional loss relief (voorlopige verliesverrekening).
Most entrepreneurs assume they must wait until the Belastingdienst has fully processed the loss-year tax return before receiving any benefit.
That is not always necessary.
After filing the tax return for the loss year, you can request that up to 80% of the declared loss be offset in advance against an already-final assessment from a previous year.
This means part of your tax refund can arrive months earlier, improving cash flow while the final assessment is still being processed.
For growing businesses, this earlier access to cash can be just as valuable as the total tax saving itself.
If you're unsure whether income averaging, loss relief or provisional loss relief applies to your situation, an experienced accountant or bookkeeper can help determine which option produces the greatest benefit.
How to Request Each One
Although income averaging and loss carry-forward are often discussed together, they follow completely different application processes.
Requesting Income Averaging
To submit an income averaging request, follow these steps:
Confirm that the definitieve aanslagen for 2022, 2023 and 2024 have all been issued.
Check that the 2024 assessment has become onherroepelijk.
Make a rough calculation to determine whether the expected refund exceeds the €545 threshold.
Submit a written request to the Belastingdienst stating the three tax years.
There is currently no official online application form for income averaging.
Remember that your application must be submitted within 36 months after the 2024 assessment became irrevocable.
Loss Carry-Forward for IB Entrepreneurs
For entrepreneurs taxed under IB, loss carry-back and carry-forward are generally processed automatically once your tax return showing the loss has been submitted.
If you want to benefit from provisional loss relief, you must submit a separate written request to your local Belastingdienst office after filing the loss-year return.
The request should specify:
The amount of the declared loss.
The tax year in which the loss occurred.
The earlier year against which you want the loss offset.
Loss Carry-Forward for BV's
For BV's subject to VPB, the same principle applies.
After filing the corporate income tax return for the loss year, you may request provisional loss relief, allowing up to 80% of the declared loss to be offset before the final assessment has been completed.
This can significantly improve liquidity during periods of lower profitability.
At any time, you may also request a verliesverrekeningsoverzicht from the Belastingdienst.
This overview shows:
Losses already used.
Remaining losses available for carry-forward.
The years to which those losses relate.
Keeping track of this overview is particularly important for IB entrepreneurs, where unused losses expire permanently after nine years.
Which Tax Relief Applies to Your Situation?
Income averaging and loss carry-forward both exist to reduce the tax impact of fluctuating income, but they solve different problems.
Income averaging is a temporary opportunity that only remains available for the 2022–2024 transitional period.
Loss carry-forward remains a permanent part of Dutch tax law and continues to help entrepreneurs and companies offset losses against profits from other years.
Understanding which mechanism applies, and in which order, can make a meaningful difference to your overall tax position.
At Neno, we help founders look beyond tax returns. Our AI-native bookkeeping and payroll services combine bookkeeping, tax planning and proactive financial advice, helping you identify opportunities that are often overlooked.
Whether you're operating as a ZZP, running a growing BV, or deciding which legal structure best supports your future plans, we're here to help.
Ready to optimise your tax position? Explore our bookkeeping and payroll services or book a demo to speak with one of our tax specialists.
Frequently Asked Questions
Is income averaging still possible in 2026?
Yes. Although income averaging was abolished for new periods from 1 January 2023, the transitional rules still allow claims for the fixed 2022–2024 period, provided all conditions are met.
What years can still be averaged?
Only 2022, 2023 and 2024. No other combination of years is eligible under the transitional rules.
What is the refund threshold for income averaging?
The recalculated refund must exceed €545. Below that amount, no refund is paid.
Can a DGA use income averaging?
Yes, but only for their DGA salary, because salary is taxed in Box 1. Dividend income is taxed in Box 2 and is never included.
What is the difference between IB and VPB loss carry-forward?
IB entrepreneurs can carry losses back three years and forward up to nine years.
BV's can carry losses back one year and forward indefinitely, although a 50% limitation applies above €1,000,000 of taxable profit.
Do unused losses expire?
For IB, yes. Unused losses expire permanently after nine years.
For VPB, losses no longer expire under the current carry-forward rules.
Can I combine income averaging and loss carry-forward?
Yes. Loss relief is applied first. After that, you can still assess whether the adjusted income qualifies for income averaging.
What is provisional loss relief and why is it useful?
Voorlopige verliesverrekening allows up to 80% of a declared loss to be offset against an earlier final assessment before the loss-year assessment is completed. This accelerates tax refunds and improves cash flow, sometimes by several months.
Written by
Nick Knuppe
CEO & Founder
