02-01-2025
Payroll
Czech Republic
Payroll, Personal income tax, Tax exemption, Pension contribution, Tax credit, Tax deduction, Employee benefits
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SME Info Czechia Nr.2025-1: Changes in payroll in 2025 in Czechia
Taxes
Annual tax reconciliation 2024
- The following tax discounts were cancelled: on kindergarten fees, for upgrading qualifications and on trade union fees
- Spouse tax relief entitlement is limited only to couples that have a child who’s age is below 3 years
- The newly introduced term ‘product for saving for old age’ pursuant to Section 15a of the Income Tax Act includes:
a) supplementary pension insurance with state contribution in accordance with the law governing supplementary pension insurance with state contribution,
b) supplementary pension savings in accordance with the law regulating supplementary pension savings,
c) pension insurance with a pension insurance institution,
d) private life insurance,
e) Long-term investment product
Employees can claim tax benefits for contributions to the above products up to CZK 48,000. Separate limits of CZK 24,000 for pension and CZK 24,000 for life insurance were abolished.
The employer’s contribution of up to CZK 50,000 per year is tax-exempt for employee.
Personal income tax for 2025
Tax rates remain the same as in 2024 (basic 15% and progressive 23%). However, the progressive tax will be applied on tax base exceeding 36 times the average wage set by law, not from 48 times as in 2024. For 2025, it will thus be applicable from base exceeding CZK 1,676,052 (CZK 139,671 per month).
Benefits
Changes in the exemption of non-monetary benefits for 2025
A limit for the exemption of non-monetary “leisure” benefits has been introduced already from 2024. The limit is 50% of the average wage, which for 2025 is CZK 23,278 per year.
Increase in tax deduction for employer’s contribution to meal allowances
From 1 January 2025, it is most advantageous for employers for tax reasons to contribute CZK 123,90 per day to meals, so they can deduct the entire amount (determined as 70% of the value of the meal allowance on a one-day business trip, i.e. CZK 177 for 2024).
The hourly lump sum home office allowance increases to CZK 4,80.
Social insurance
Changes in levies on agreements to work
In July 2024, a new register of employers for the registration of employees working under agreements to work (DPP) was launched. Companies fill in and submit a monthly report to the Czech Social Security Administration, containing information about the employee, the scope of work and the amount of earnings.
According to the new rules, employers must register everyone who has a DPP with the Czech Social Security Administration. This is regardless of whether the employee is obliged to participate in sickness and pension insurance.
Other previously approved changes that were supposed to be introduced from 1 January 2025 were cancelled, except of the increase of the upper limit for exemption from health and social insurance.
The limit for earnings without levies is set at 25 percent of the average wage in the case of DPP (for 2025 it will be CZK 11,500 and in subsequent years it will automatically change according to the average wage amount). Until now, this limit was at 10 thousand crowns.
Small-scale employment
In addition, the decisive income for small-scale employment increases to CZK 4,500 (from the original CZK 4,000).
Maximum assessment base
The limit for the maximum assessment base for social security insurance is set at 48 times the average wage, the amount for 2025 is CZK 2.234,736.
Discount for working pensioners
The discount for working pensioners will be 6.5% – i.e. social insurance rate will be 0.6% instead of 7.1%. Employees who will apply the discount will no longer need the pension sheets and no recalculation of pensions after days worked is performed.
Sickness benefits from 1 January 2025
From 1 January 2025, sickness benefits documentation is completely digitized. In addition to sick notes, also nursing allowances, long-term nursing allowances, maternity benefits, paternity or maternity compensatory allowance are digitized. The Czech Social Security Administration will send notifications to employees, based on which the employee must pass on the necessary information to employers for payment of the benefits.
The purpose of SME INFO is to provide general information and to draw the attention to the current changes in law which we believe to be important for the business operation of our clients. It is not a replacement for careful review of the acts and rules and the consultation with your tax advisor. © Copyrights 2025, Process Solutions, – All rights reserved