Responding to the economic development and a growth in the public debt, the Government of the Czech Republic decided to prepare a public finance plan to assist in reversing the negative tendency. The Government introduced their proposal on 11 May 2024, envisaging the measures’ effect as soon as of 1 January 2024. Please find below a short summary of the proposed changes in the tax field as well as in other related areas.
All the proposed changes have to go through the standard legislative process and substantial modifications can therefore be expected. We will monitor the whole legislative process for you and will keep you informed about any developments.
Personal Income Tax
- A lower threshold in applying the tax rate in the amount of 23% from the current 48 times to 36 times the average salary (this threshold will drop down from four times to three times the average salary in the monthly payroll agenda).
- Stricter conditions to apply a tax relief for a spouse (a new condition involving taking care of a child below three years of age should be introduced).
- Cancelled tax relief for a child placed in a pre-school facility, the so called “kindergarten tax relief”.
- Cancelled tax exemption for meal coupons above a threshold.
- Cancelled relief for a student.
- Cancelled tax exemption for non-monetary employee benefits.
- Cancelled deduction for trade union membership fees.
- Lower tax exemption for income from tombola and gambling.
Insurance
- An increase in the assessment base in calculating insurance premium payments for self-employed individuals to 55% of the tax base (from the current 50%).
- Continuous increases in the minimum monthly assessment base for payments of social security insurance premium for self-employed individuals by 5% each year between 2024 through 2026 (as a result, the assessment base will increase to 40% from the existing 25% by 2026).
- Introduction of employee medical insurance in the amount of 0.6%.
Corporate Income Tax
- An increase in the tax rate from the current 19% to 21%.
- Limits put on tax deductibility in purchasing passenger vehicles in the amount of CZK 2 million from the car’s price (with certain exceptions).
- Cancelled tax deductibility of still wines as a gift below CZK 500.
- Extension of extraordinary amortisation for motor road vehicles running on electricity (acquired from 1 January 2023 through 31 December 2028).
- VAT
- Two rates should newly be used: the basic one (21%) and a reduced one (12%).
- Hairdressing or cleaning services, shoe and clothing repairs or collection, transport, disposal and processing of municipal waste, among others, should be moved to the basic VAT rate category.
- Construction work or irregular public passenger land transport should be transferred into the new lower tax rate category.
- Taxation of beverages will substantially change.
Excise Tax and Energy Taxes
- An increase in excise tax on spirits by 10%, by 5% each year between 2025 and 2027.
- An increase in excise tax on cigarettes, cigars, smoking tobacco and cigarillos by 10%, by 5% each year between 2025 and 2027.
- Periodic increases in excise tax on heated tobacco by 15% in 2024-2027.
- A new excise tax on snuff and chewing tobacco, snus or e-cigarette refills.
- Cancelled tax exemption of aviation fuels for national transport, and tax exemption of mineral oils used in metallurgic or mineralogical processes.
- Cancelled energy tax exemption of electricity, natural gas and solid fuels when used in metallurgic or mineralogical processes.
Real Estate Tax
- Introduction of automated valorisation of tax liability with reference to inflation.
- An increase in real estate tax, which will flow into the national budget as income.
Michaela Kozminská Lenka Kolmanová
kozminska@edmutilitas.cz kolmanova@edmutilitas.cz
