Amendment to the Czech Income Tax Act: ESOP
Dear Readers,
This article will inform you about changes related to the Czech Income Tax Act that came into force as of 1 January 2024 as part of the law in connection with enhancements of the financial market (Act No. 462/2023 Coll.).
Amendment Related to Employee Shares
We informed you about changes in connection with taxation of Employee Stock Ownership Plans in one of articles dealing with a prepared law related to enhancements of the financial market in the Czech Republic (Parliamentary Press No. 474).
The amendment regulates the moment of taxing the Employee Stock Ownership (Option) Plan (ESOP) and explicitly defines the moment when a share’s or option’s acquisition is considered an employee’s taxable income from a dependent activity. The new rules apply to income from acquisition of a share or so-called convertible option in a corporation. As stated by the Ministry of Finance of the Czech Republic, the amendment would not bring any changes in the fact that non-convertible options are not taxed with regard to option plans.
In this regard, we would like to draw your attention to the fact that the shift in taxation since 1 January 2024 has temporarily been regulated only in the Income Tax Act. The changes were not projected in laws regulating insurance premium. Social security and healthcare insurance contributions continue to be linked to the moment of the provision or purchase of shares under advantageous conditions and, as a result, do not correspond with the moment of taxation. However, the Ministry of Finance of the Czech Republic initiated a bill on related changes also in the area of insurance laws. We will keep you posted about any associated developments.
What is also new is employees’ duty to inform their employer. Where a share or option is transferred, the employee will be obliged to inform his or her employer by the final date of the calendar month, in which the transfer occurred.
This article is a summary of information and was not intended to be exhaustive. If you are interested in having more information about this topic, please feel free to contact us. We will be happy to help you.
Stela Bartošová
bartosova@clarksonhyde.cz
