20240201-KPMG_Global-Czech_Republic_–_Changes_in_Employee_Income_Taxation_in_2024_6页_348kb

2024 Czech Republic Employee Income Tax Changes Summary

Key Changes Overview

Tax Rate

• The threshold for the progressive tax rate (income above 3 times average wage monthly / 36 times annually) was reduced to CZK 1,582,812. Tax rate of 15% applies below threshold.

Benefit Exemptions

• Tax exemption for leisure-related non-financial benefits capped at half the average annual wage (CZK 21,983.50). Benefits above this limit are taxable, except for employee participation in employer-organized occasional sporting or cultural events customary and appropriately scaled.
• Methodological guidance issued for taxing benefits from 01/01/2024 requires taxpayer clarification.

Meal Allowances

• Tax treatment for both financial and non-financial meal allowances unified for business trips (5-12 hours): Exempt up to CZK 116.20 per employee per tax year (subject to conditions: worked >= 3 hours, not part of travel allowance). Exemption increases to CZK 232.40 if shift (including breaks) exceeds 11 hours.
• Workplace refreshments do not count towards the tax-exempt allowance.

Tax Credits

• Individuals cannot claim deductions for trade union fees, exam verification fees for further education, or tax credit for children in pre-school anymore.
• Student tax credit removed from monthly payroll and year-end settlements.
• Dependent spouse tax credit only available if spouse earns <= CZK 68,000/year and cares for child under 3 in household.

Other Benefit Taxation

• Vehicles: Taxable monthly income for emission-free company cars reduced (0.25% up to 0.5% of input cost).
• Remote Work: Hourly tax-exempt remote work reimbursement (home office) reduced from CZK 4.60 to CZK 4.50 pending Labour Code update.
• Sickness Insurance: Introduced 0.6% employee contribution to sickness insurance, increasing total social/health insurance contribution rate to 11.6%.

Financial Effects

• Minimum Wage: Increased from CZK 17,300 to CZK 18,900, raising minimum monthly health insurance base and child tax bonus threshold.
• Insurance Products: Introduced tax-efficient long-term care insurance and investment policies; employee contributions up to CZK 48,000 exempt; employer contributions subject to limits.

Share/Option Plans

• Changed effective date for taxing share/option plan income from acquisition to events implying a 'cessation' of employment or other specified events occurring outside the CEEU/CAEU framework (e.g., employee assignment end, tax residency end, share transfer/option exercise). Employers must remit payment in the following month.

Impact

• Changes raise state revenue.
• May require adjustments in international assignment budgets, tax planning, and employee compensation structures.
• Potential discrepancies exist between the new tax deferral timing (from plans) and the regulatory timing (old law) for social security contributions. Social security law updates expected soon.
• Unclear issues likely remain, particularly for cross-border employees.