Amendment to Act No. 586/1992 Coll., on Income Taxes

Employee benefits

• Non-monetary benefits, which are currently exempt from tax, will only be exempt from the tax burden for a given tax period on the part of the employee up to half the average wage.
• Non-monetary benefits provided up to the limit will be a non-tax-deductible expense for employers, as before, and excess costs will be tax deductible for employers. 

Higher taxes on high-income workers

• The amendment should also affect employees with higher incomes.
• According to the draft, the threshold for the 23% personal income tax will be reduced from 48 times to 36 times the average wage. This will extend the income band to which a 23% tax rate will be applied (Section 16 (1) (a)). 

Motor vehicle for business and private purposes

• The amendment amends Section 6 (6), which regulates the taxation of non-monetary income in the form of the employee's ability to use a company car for private purposes.
• The consolidation package extends the list of vehicles and their taxation by employees to include zero emission vehicles. An emission-free vehicle is, according to the newly proposed wording of Section 21b (7), a road motor vehicle that uses only electricity or hydrogen as fuel, or another road motor vehicle whose operation has no CO₂ emissions.
• In the case of the provision of a road motor vehicle by the employer to the employee for use for both business and private purposes, the employee's income will be considered the amount of the specified percentage of the entry price.
• The percentage is determined according to the category under which the road motor vehicle falls:

1. 0.25% if the vehicle is an emission-free vehicle;
2. 0.5% if it is a low-emission vehicle;
3. 1% if it is a road motor vehicle that is not a low-emission or zero-emission vehicle. 

Cancellation or limitation of tax exemptions

A wide range of tax exemptions are being abolished or reduced:

• Student discount – letter (f) in Section 35ba (1) is cancelled – i.e., the student discount in the amount of CZK 4,020, which the taxpayer could apply for the period during which he was constantly preparing for a future profession by studying or prescribed training up to 26 (or 28) years of age, has been cancelled.
• Discount for the placement of a child – letter (g) in Section 35ba (1) is cancelled – i.e., the discount for the placement of a dependent child in a preschool institution (school fees) has been cancelled.
• Discount on spouse (Section 35ba (1) (b) – there is a significant reduction in the discount for a non-working spouse. The discount remains in the amount of CZK 24,840, while the amount of the discount doubles if the discount is applied to a spouse who is entitled to a severe disabilities card. However, the discount can now only be applied if the taxpayer lives in a jointly managed household with the spouse and the dependent child of the taxpayer, who has not reached the age of 3 and at the same time the spouse of the taxpayer must not have his/her own income exceeding CZK 68,000 in the tax period.
• The cancellation of the deduction for trade union membership contributions and the deduction of payments for examinations verifying the results of further education – in Section 15 the amendment to the act cancels paragraph 7 (membership contributions to trade unions) and paragraph 8 (payment for examinations) including footnotes 82 and 82a. 

Non-monetary contribution to meals (meal tickets) and the meal ticket contribution

• The consolidation package also unifies the legal regulation of meal tickets and the meal ticket contribution (Section 6 (9) (b)).
• Now the non-monetary contribution for the employee will only be exempt up to 70% of the upper limit of the allowance, which can be granted to employees remunerated by a salary on a 5 to 12-hour business trip, i.e., as is the case with the meal ticket contribution.
• Under the same conditions, it will also be possible to provide an additional contribution as part of one shift if its total length including the mandatory break in work is longer than 11 hours.

Author: Blanka Knedlová, HR & Payroll Services Senior
Editor: Martina Farářová, HR & Payroll Services Manager