Planned changes to employee income taxation legislative

By NOVINKY

The Chamber of Deputies, at its session starting on 5 September 2023, is discussing, among other things, in its second reading, a consolidation package of several measures and laws aimed at reducing the state budget deficit over the next two years. These measures are expected to come into force from 1 January 2024. Amendments to the consolidation package, agreed by the parties of the government coalition at their meeting on 23 August 2023, have also been included.

Below is a summary of the most important proposed amendments concerning the taxation of employee benefits:

  • Non-monetary benefits, which employers currently provide to their employees on tax-favourable terms, will not be abolished, but the total value of benefits that will be exempt from taxation on the employee’s side will be reduced (per year up to a maximum of half of the average wage, which in 2023 corresponds to CZK 20,162).
  • For the employer’s contribution to the employee’s meals, the conditions for the exemption of such contribution on the employee’s side will be unified for all forms of provision of such contribution (cash contribution for meals, meal voucher, company meals or other non-monetary benefits)
  • It is proposed to abolish the exception for the purchase of flats and houses by an employee from an employer for a price lower than the normal price, where the difference between the sale price and the normal price has not been considered as income of the employee if the employee had resided in the flat for at least 2 years before the sale. The new rules will not apply to employees who already resided in such a dwelling before 1 January 2024.
  • There will be a reduction in the amount of non-monetary income in situation where an employer provides an emission-free motor vehicle free of charge to an employee for private use, to 0.25% of the entry price for each month of provision of such vehicle.
  • The tax treatment of contributions to pension savings and life insurance, as applied to date, is not affected by the changes proposed in the consolidation package.

Also, the taxation of employee income will be affected by the following proposed changes:

  • lowering the limit for applying the 23% tax rate from 48 times to 36 times the average wage,
  • limiting the possibility to apply the spouse’s discount only to people caring for children under 3 years
  • abolition of the student discount,
  • abolition of the kindergarten discount,
  • abolition of the deduction for union dues paid,
  • abolition of the deduction for examinations verifying the results of further education.

We will continue to keep you informed of any further changes and the process of approving the consolidation package.

Your LTA team