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Dear Readers,

Please find below our short news for October 2024:

• The Government published Government Regulation No. 282/2024 Coll. whereby the average wage for 2025 was determined at CZK 46,557. The average wage’s level has implications for the assessment base in calculating social security and healthcare insurance advances and for the amount crucial in respect to participating in sickness insurance. In addition to this, it also has an impact on various tax thresholds (the level of flat-rate tax in freelancers, the progressive 23% rate in individual income tax, the threshold for exemption of non-monetary employee benefits, etc.).
   
• The Czech Social Security Administration Authority published information about the most frequent mistakes in filing reports on agreements to complete a job. Filing with a mistake can result in rejection or delay in the report’s processing. Mistakes include wrongly completed birth number, first or last name, or typos. More information is available here.
   
• On 2 October 2024, the Ministry of Labour and Social Affairs published a press release to respond to the floods, whereby the Floods 2024 scheme was launched. You can read more in our article here.
   
• On 14 October 2024, the Financial Administration published information for payers of tax on dependent activities about new forms for the taxation periods 2024 and 2025. These forms’ update responds to legislative changes.
   
• On 15 October 2024, the Ministry of Finance of the Czech Republic published information that a Double Tax Treaty between the Czech Republic’s Government and the Government of the Sri Lankan Democratic socialist Republic in the area of income tax and on preventing tax evasions and avoidance came into effect on 27 August 2024. The new treaty’s provisions will start to be implemented as of 1 January 2025.
   
• Following upon the previous section, please be advised that the Ministry of Finance of the Czech Republic published information on 21 October 2024 about an update of the schedule of effective Czech Republic’s double tax treaties in the area of income tax, or income and property tax, as appropriate. The update applies to treaties with Albania and Sri Lanka; a schedule of effective treaties can be found here.
   
• On 22 October 2024, the Chamber of Deputies approved a bill on special assistance to individuals affected by floods in 2024 and a draft amendment to Act No. 111/2006 Coll., on Emergency Benefits, as subsequently amended (Parliamentary Press No. 824). The legal regulations are of a temporary nature and are intended to respond to consequences of floods in the Czech Republic.
   
• As part of an amendment to the Act on Providing Care for a Child in a Children Group, the following amending proposals concerning the Income Tax Act were introduced:
   
• • The first amending proposal concerns tax support of an old-age pension saving product. It has been proposed that the period of a product, which was supported in tax terms and which ceased to exist, be included in the term of the tax supported product. As a result, the law would be expanded with conditions, under which savings periods will be added up upon a change of the provider or a product of the same type for the purposes of considering whether the tax support pursuant to Section 15b (4) of the Income Tax Act should be returned or not. We are monitoring the legislative process for you and will keep you informed.
  • The second amending proposal concerns income generated by employee option/stock plans. It has been proposed that a shift in taxing such income be only applied in cases where an employer notifies the tax administrator of an intention to apply this procedure by the 20th day of a calendar month following the calendar month, in which an employee acquired a share or an option. If the tax administrator fails to be notified, the moment of taxation would be determined with reference to the legal regulation effective until the end of 2023 (i.e. the moment of taxation would not be moved). This regulation would apply to income from 1 January 2025. With regard to income generated in taxation period 2024, the shift in the moment of taxation would be applied in case that the employer announces a taxation shift plan within two months after the law’s amendment had come into effect. The above-described possibility of choosing the moment of taxation would also apply to social security and healthcare insurance contributions. We are monitoring the legislative process for you and will keep you posted.
     
• As part of an amendment to the Employment Act, several amending proposals were submitted; please find below changes concerning the Income Tax Act, specifically individual income tax (Parliamentary Press No. 743).
   
  • Separate exemption for “acquisition of goods or services of a medical, therapeutic, sanitary or similar nature from healthcare facilities, or acquisition of medical items with a medical prescription” is being introduced. Those non-monetary supplies provided by an employer to an employee should be separately exempt up to the level of an average wage for the taxation period (CZK 46,557 in 2025). The amendment should become effective on 1 January 2025. Please be advised that other non-monetary benefits (such as allowances for cultural and sports events or use of education/sporting facilities) exempt pursuant to the existing Section 6 (9) (d) of the Income Tax Act will continue to be exempt up to the threshold of one half of the average wage. We are monitoring the legislative process for you and will keep you informed.
  • One of the proposals should change again the mode of taxing and paying insurance premium in agreements to complete a job (the “ACJ”). The agreements’ register with the Czech Social Security Administration Authority will remain valid, but an employee’s monthly income from ACJs should not be subjects to paying the contributions from 2025, unless reaching 25% of the average wage (i.e. CZK 11,500 for 2025), and the same threshold should also apply to withholding tax. We are monitoring the legislative process for you and will keep you informed.
     
• An amendment to the Act on Certain Measures Concerning Armed Conflicts (Parliamentary Press No. 727) went through the second reading in the Chamber of Deputies. Proposed changes also concern the area of taxes, specifically Act No. 128/2022 Coll. Amending proposals propose that the possibility to deduct the value of a free-of-charge supply up to 30% of the tax base for the taxation periods of 2022 through 2026 be extended. We are monitoring the legislative process for you and will keep you posted.
   
• An amendment to the Act on Pension Insurance (Parliamentary Press No. 696) went through the second reading in the Chamber of Deputies. The proposed legal regulation focuses, among others, on increasing the minimum percentage assessment of pensions, on slowing down the growth of newly awarded pensions, and voluntary sharing of assessment bases between spouses. The amendment is proposed to become effective on 1 January 2025, and on 1 January 2026 and 1 January 2027 for certain measures. We are monitoring the legislative process for you and will keep you informed.
   
• Following upon the previous section, the Ministry of Social Affairs published information on 25 October 2024 concerning sickness insurance allowances’ payment. Self-employed individuals and employees who perform work on the basis of an ACJ or a contract for work will newly be also entitled to a nursing allowance. Details are available here.
   
• On 26  September 2024, Act No. 280/2024 Coll., which amends Act No. 253/2008 Coll., on Certain Measures against Money Laundering and Financing Terrorism, as subsequently amended, and additional related laws were announced in the Collection of Laws. The law will become effective on 30 December 2024, with the exception of the second and third provision, which come into effect on the date following the announcement date.
   
• An amendment to Act No. 235/2004 Coll., on Value Added Tax (Parliamentary Press No. 726), which will significantly affect for example the real estate industry, was approved in the third reading on 30 October 2024. The law is expected to become effective on 1 January 2025 (with certain exceptions to come into effect later). We are monitoring the legislative process for you and will keep you posted about the final shape of the amendment.
   
• The Financial Administration published information about a transition to a new single domain “gov.cz” on 25 October 2024, the aim being to simplify access to information, to enhance communication security, to mitigate the risk of cyber threats, and to provide for an easier navigation in online services. More information is available here.
   
• On 25 October 2024, the Czech Social Security Administration Authority published information about a change in the level of withholdings in multiple seizures in connection with an amendment to Act No. 99/1963 Coll., the Rules of Civil Procedure. You can find details here.
   
• The deadline for lodging CBAM reports (reports on gas emissions embedded in imports) for the 3rd quarter of 2024 will expire on 31 October 2024.
   
• The Ministry of Finance published two financial newsletters in October:
   
• • Financial Newsletter No. 08/2024, which provides information about changes in the text of the Treaty between the Czech Republic and the Albanian Republic to Prevent Double Taxation and Tax Evasion in the Area of Income and Property Taxes, was published on 11 October 2024; and
  • Financial Newsletter No. 9/2024, which contains a listing of states provided in the EU list of non-cooperative jurisdictions for tax purposes approved by the Council of the European Union, was published on 24 October 2024.

Stela Bartošová
bartosova@clarksonhyde.cz