29-11-2023
Payroll
Czech Republic
payroll, employee benefits, tax progression, sickness insurance, e-mobility, meal vouchers
Download here the English+Czech bilingual pdf of this newsletter:
Legislative changes impacting payroll in Czechia in 2024 – SME Info Czechia 2023-04
Change in tax progression
The higher tax rate will be applied from 36 times the average wage set by the Sickness Insurance Act (“average wage”), which is from CZK 1,582,812 per year (CZK 131,901 per month).
Change in tax credits and deductions
- Tax credits for students and for kindergarten fees are cancelled. The tax credit for spouse will be conditional on caring for a child under three years of age.
- Cancelled are also the deductions for examinations verifying the results of further education and for the contributions paid to trade unions.
- The limit for the tax deduction of pension and life insurance is aggregated – it will now be CZK 48,000, instead of separately CZK 24,000 for each.
Preferential e-mobility benefit in kind
Just 0.25% of the purchase price, including VAT, will be included in the employee’s salary as non-monetary income for zero-emission vehicles used for both private and business purposes.
Change in agreement to work performance
The limit for the application of withholding tax for agreements to work performance and the limit for participation in social security and health insurance contributions will be set at 25% of the average wage in the case of agreements with one employer (CZK 10,500 in 2024) from 1 July 2024. The limit for participation on the contributions is 40% of the average wage (CZK 17,500 in 2024) in case of parallel agreements with several employers.
Limit for tax exemption of benefits
Limit for the tax exemption of non-monetary “leisure” benefits in the amount of half of the average wage has been introduced. The limit for 2024 is CZK 21,983. Non-monetary benefits provided to employees up to this limit will be tax exempt, the value of non-monetary benefits exceeding this limit will be considered taxable income of an employee with the obligation to pay social security and health insurance. The exemption of benefits provided from the fund for cultural and social needs has been abolished.
With some exceptions the costs of the benefits will be tax non-deductible for the employer as long as within the tax exemption limit for the employee.
Meal vouchers, meal allowance
In the case of meal vouchers, the upper limit for exemption will
be unified with the so-called meal lump-sum, where the limit will remain at 70% of the statutory meal allowance for a business trip of 5-12 hours.
Sickness insurance
Sickness insurance contributions will newly also be paid by employees as 0.6% of the assessment base. From January 2024, the total social security contributions for employees will thus increase to 7.1% from current 6.5%.
Employees working on the agreement to work performance will be subject to participation in sickness insurance if their income from all agreements with one employer exceeds 25% of the average wage (CZK 10,500 in 2024) or from all agreements with multiple employers exceeing 40% of the average wage (CZK 17,500 in 2024). Employees will be obliged to pay directly to the authority their share of the the social security contributions in the amount of 7.1% in case of agreements with several employers. The obligation to pay health insurance on behalf of the employee will remain with the employer.
—————————
Download here the English+Czech bilingual pdf of this newsletter:
Legislative changes impacting payroll in Czechia – SME Info Czechia 2023-04
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 2023, Process Solutions, – All rights reserved