InsightsJanuary 11, 2019
Converted into a BV? Use the averaging scheme!
If you’ve converted your sole proprietorship into a BV (private limited company), you get to deal with various taxes. The profit you made in your sole proprietorship is (progressively) taxed for income tax. The profit from your BV is taxed for corporation tax. And the wage you earn as a DGA (director and major shareholder) in your BV is then taxed for income tax.
If your income is variable, you can use the averaging scheme. This means you calculate your average income of the past three years and then calculate the income tax you owe on this. If this amount of tax is lower than what you’ve already paid, you can reclaim it (after having deducted a threshold).
The height of the profit is often one of the main reasons to switch to a private limited company
Example: In 2015 your taxable income is 100K. In 2016, it’s 150K. In 2017, you converted your business into a BV and as a shareholder you earn the compulsory salary of 45K. In 2018 you’ll also earn the compulsory salary of 45K.
If you use the averaging scheme on the years 2015 to 2017, you can expect a tax refund of almost €2,000. If you average 2016 to 20218, you can expect a tax refund of no less than €4,500!