DPP – change in taxation and insurance contributions

By NOVINKY

The Chamber of Deputies has approved a change in the rules for income tax and insurance premiums for performance of work agreements (PPAs). The amendment will now be discussed by the Senate.

What will apply from 01.07.2024 in any case

Employers’ records of all DPPs entered into and income from them.

Monthly reporting by employers to the Social Security Administration on the employment of employees on a VPA, even if the employee does not receive any income from the VPA in a given month.

What should apply in the area of insurance premiums from 01.01.2025 if the amendment is approved

The new rules should apply only from 01.01.2025. The old regime should apply until the end of 2024.

DPPs will generally be treated as employment.

  • The aggregate of income from a DPP with one employer up to 3,999 kc will be small scale employment and will not be subject to insurance premiums.
  • Insurance premiums will be payable on income contracted of K4,000 or more.

It will be possible to designate a main FTE on which the employer does not have to pay the premium up to CZK 10,499

  • It is possible only for one employer who notifies the OSSZ first.
  • Income from all FTEs of a given employer, if in aggregate it does not exceed CZK 10,499, will not be subject to insurance premiums. Income in excess of CZK 10,499 will be subject to insurance premiums.
  • The limit will now be assessed on all the employee’s PPAs concluded with one employer.
  • The employer will be able to check with the Social Security Office whether someone else is already applying the preferential scheme to the employee.

What should apply in the area of taxation from 01.01.2025 if the amendment is approved

Withholding tax will be levied on the income of employees on a DPP in the preferential regime up to CZK 10,499. In case of higher income, advance tax will be applied.

In the case of income of employees on FTE outside the preferential regime, the withholding tax is applied if the total income from FTE, FTE and employment relationship with one employer in a calendar month amounts to CZK 3,999 or less. In case of higher income, advance tax is paid.