Government consolidation package of measures

Personal Income Tax 

• Reduction of the threshold for applying the 23% personal income tax rate from 48 times the average salary to 36 times the average salary
• Limitation of income exemption from the sale of securities or shares in a company when a time test of 3 years or 5 years between acquisition and sale is met, for an amount of CZK 40,000,000 per taxpayer.
• The possibility to claim a deduction for a supported spouse only in the case that he/she cares for a child up to the age of three.
• Abolition of the deduction for placing a child in a preschool facility and abolition of the student deduction.
• Abolition of tax exemptions for most non-monetary benefits provided to employees and limitation of tax exemptions in case of the boarding support provided in the form of meal vouchers.
• Reduction of the threshold for tax exemption on lottery or raffle winnings from 1,000,000 CZK to 50,000 CZK.
• Reintroduction of sickness insurance for employees at a rate of 0.6%.
• Abolition of the possibility to deduct the trade union membership fees from the tax base

Self-employed individuals 

• Gradual increase of the minimum assessment base for social security contributions from the current 25% of the average salary to 40% of the average salary, with a yearly increase of 5 percentage points from 2024 to 2026.
• Increase of the assessment base for calculating insurance contributions to at least 55% of the tax base instead of the current 50%. 

Corporate income tax 

• Increase of the corporate income tax rate to 21% (from the current 19%).
• Limitation of tax deductibility for the purchase of passenger cars for business purposes to the first 2 million CZK of the vehicle's price.
• Removal of tax deductibility of costs for silent wine with the price of up to 500 CZK including VAT used as a gift for representation purposes.

Value added tax 

• Introduction of two VAT rates, a standard rate of 21% and reduced rate of 12% (consolidating the majority of items currently divided into two reduced VAT rates of 15% and 10% into a single reduced rate of 12%).
• Occasional mass bus transport of passengers is moved from the standard VAT rate to the reduced rate of 12%.
• On the other hand, beverages, excluding selected dairy products, hairdressing and barber services, draft beer, services of authors and artists, collection, transport, and disposal of municipal waste, shoe repairs, leather goods and bicycle repairs, cleaning services, firewood, and newspapers are moved to the standard VAT rate.
• VAT on paper and electronic books, as well as library services will not be applied.

Excise duties 

• Increase in excise tax on cigarettes, smoking tobacco, waterpipe tobacco, cigars and cigarillos by 10% in 2024 and an additional 5% each year from 2025 to 2017. Regular increases of 15% in the tax on heated tobacco each year from 2014 to 2017.
• Introduction of a new excise tax on nicotine pouches and e-cigarettes refills, as well as chewing and snuff tobacco.
• Increase in excise tax on spirits by 10% in 2024 and an additional 5% each subsequent year from 2025 to 2027.
• Cancellation of exemption for aviation fuels (aviation gasoline, kerosene) from excise duty for domestic flights.
• Change in the procedure for claiming mineral oil tax refunds used for agricultural primary production and forestry management (so called “green diesel“ refund).
• Cancellation of excise tax refunds of excise duty on mineral oils used in mineralogical and metallurgical processes. 

Energy taxes 

• Cancellation of exemptions from gas tax, solid fuel tax, and electricity tax for the use of these commodities in metallurgical and mineralogical processes. 

Pension reform 

• Gradual increase in the retirement age and adjustments to the parameters for calculating new pensions.
• Tightening of conditions for early retirement.
• Voluntary sharing of pension entitlements between spouses.
• Increase in the guaranteed minimum pension amount.

There are also plans for an increase of real estate tax and gambling tax, limitations on national subsidies, limitations on the accumulation of agreements on work performance, reduction of state support for building savings for existing and new contracts, and an increase in the price of motorway vignettes, among other things.

The government plans to approve the legislative wording of the package during June so that the first reading in the Chamber of Deputies can take place before the holidays, and the reform package can come into effect on January 1, 2024. In the following months, we will monitor how the individual measures are reflected in the relevant legal regulations and we will continue to keep you informed.

If you have any questions, do not hesitate to contact our experts.