Change in Average Salary In 2025
Dear Readers,
We informed you about an increase in the average salary in 2025 in our Short News for October 2024. Today’s article brings a summary of information about additional areas, which will be affected by the change in the average salary.
How Is the Average Salary’s Value Determined?
Average salary is calculated as a multiple of the general assessment base for a calendar year, which precedes the calendar year, for which the average salary is identified, by two years, and a conversion rate for that general assessment base’s modification. The calculated amount is rounded up to whole crowns.
The change in the average salary has an impact on the following:
- The threshold in applying the individual income tax rate at 23%;
- The minimum insurance premium advance of self-employed individuals;
- The maximum assessment base of social security insurance;
- The amount material in determining contributions of employees to sickness insurance;
- Limits in employee benefits (pursuant to Section 6 (9) (d) of the Income Tax Act); and
- Monthly payments for taxpayers in the lump-sum tax mode.
- Threshold in Applying the Individual Income Tax Rate at 23%
As a result of the increase in the average salary, the threshold material in applying the tax rate at 23% in calculating advances for tax on dependent activities and in calculating individual income tax will go up.
In the case of monthly advances for individual income tax on dependent activities, the income tax advances at 23% will be paid from the portion of income, which exceeds, in a calendar month, an amount equal to three times the average salary. As a consequence, this threshold is CZK 139,671 for 2025.
The tax rate at 23% will be applied to the portion of individual income tax base exceeding the material amount of CZK 1,676,052 (36 times the average salary) for the calendar year 2025.
- Minimum Insurance Premium Advance of Self-Employed Individuals
- Social Security (Pension) Insurance
The minimum advance is increased to CZK 4,759 in 2025 for self-employed individuals who carry out primary activities.
Where a self-employed individual has commenced the self-employed activity, has been carrying such activity as the primary one, and did not carry out this activity for a period of 20 calendar years prior to the year when this activity was commenced, the minimum monthly assessment base is 25% of the average salary in the year of the income-generating activity’s commencement and in two immediately following calendar years. As a result, the minimum level of insurance premium advances for 2025 amounts to CZK 3,399.
The minimum advance is increased to CZK 1,496 in 2025 for self-employed individuals who carry out a secondary activity.
The amount material for mandatory participation in pension insurance of self-employed individuals who carry out a secondary activity is CZK 111,736 in 2025.
What is new for a self-employed individual who starts his or her business operation in no earlier than 2025 is that he or she will not be obliged to pay insurance premium advances for calendar months of the calendar year, in which he or she commenced the self-employed income-generating activity, and for calendar months of the immediately following calendar year, as long as the individual was not self-employed in the period of five calendar years prior to the calendar year, in which that individual commenced his or her activity. The exemption from the duty to pay insurance premium advances applies to self-employed individuals who perform both a primary and secondary self-employed activity, and does not apply to self-employed individuals who are taxpayers in the lump-sum mode.
In addition to this, a self-employed individual who reached the retirement age and is entitled to the payment of a retirement pension in the full amount has had the right to a reduction in the retirement insurance premium at 6.5% of the assessment base since 1 January 2025. If the self-employed individual was entitled to the payment of a retirement pension in the full amount only in certain calendar months of the calendar year, in which he or she carried out the self-employed activity, such individual is only entitled to an insurance premium discount from a portion of the assessment base determined on a proportionate basis.
- Public Healthcare Insurance
The minimum healthcare insurance advance is CZK 3,143 in 2025.
Please be advised that the minimum healthcare insurance advance is only set for self-employed individuals who carry out a primary activity. Self-employed individuals carrying out a secondary activity are not required to pay the minimum advances.
- Maximum Assessment Base of Social Security Insurance
The maximum assessment base in social security insurance has grown to the amount of CZK 2,234,736 in 2025. The maximum assessment base is identical for both self-employed individuals and employees and applies to the sum of all income from both dependent and self-employed activities in the particular year.
- Amount Material in Determining Employees’ Contributions to Sickness Insurance
The amount material in determining employees’ contributions to sickness insurance is also derived from the average salary’s value (1/10 of the average salary rounded down to the whole CZK 500); as a consequence, this material amount is CZK 4,500 for 2025.
- Limits in Employee Benefits
In 2024, a threshold for exemption from income tax in employee benefits taking the form of non-monetary supplies at one half of the average salary for a taxation period was set pursuant to Section 6 (9) (d) of the Income Tax Act for the first time.
Since 1 January 2025, this threshold has been differentiated: the original level at 1/2 of the average salary remains effective for most employee benefits. In 2025, those non-monetary benefits enumerated in Section 6 (9) (d) (2) (sports and cultural events, recreation, books, preschool children facilities) will be exempt in employees up to the amount of CZK 23,278.
The increased exemption threshold in the amount of the average salary for the taxation period has been separately determined for healthcare benefits since 1 January 2025. We informed you about this change in our Short News for December 2024. Healthcare non-monetary benefits are exempt in employees up to the amount of CZK 46,557 in 2025.
- Monthly Payments for Taxpayers in the Lump-sum Tax Mode
In 2025, the uniform monthly payment to the tax office is also increased for taxpayers who use the lump-sum tax mode in Tier I. Levels of the lump-sum tax monthly advance in 2025 are shown in the below table.
The below table brings a summary of all pieces of information provided above:
In case you would like to have more information concerning this article, please feel free to contact us. We are ready to help you.
Jitka Sobotková
sobotkova@clarksonhyde.cz
