The government has unveiled a set of planned measures designed to reduce the fiscal deficit. In this article, we summarize some of the changes in the area of taxation.
Personal income tax
– A higher (23%) rate on monthly earnings of employees which exceed three times the average wage (i.e., currently, an amount of approx. CZK 121,000), as opposed to today’s cut-off point at four times the average wage (i.e., approx. CZK 161,000).
– Lowering of the annual cut-off point for a higher personal income tax rate on the income of natural persons, from 48 times the average wage today to 36 times the average wage in the future.
– Abolition of the tax relief for taxpayers who are students.
– Abolition of the tax exemption for company benefits-in-kind granted to employees.
– Restriction on the flat-rate tax relief for a spouse without relevant income, in that eligibility will newly be tied to full-time parental care for a child under the age of four.
– Restricted tax exemptions for sales of securities and shares in companies – the current personal income tax exemption on proceeds from selling securities up to an amount of CZK 100,000 per assessment period will remain in place, but a new threshold for the exemption of income from sales of securities and shares which are only effected after a retention period of 3 or 5 years between acquisition and re-sale has been stipulated in the amount of CZK 40M per taxpayer.
– Abolition of the tax break for fees paid in connection with the enrolment of taxpayers’ children in pre-school facilities.
Corporate income tax
– The corporate income tax rate shall be increased from currently 19% to 21%.
– Introduction of a cap on the tax deductibility of business cars, whereby only the first two million crowns of the purchase price are recognized as a business expense.
– Abolition of the tax deductibility of non-sparkling wine as a gift (up to CZK 500, in the form of costs of representation/entertainment.
VAT
– Reduction in the number of VAT rates: in the future, the government envisions one standard rate of 21% alongside one reduced rate of 12%. By unifying the reduced rates in this manner, a smaller amount of VAT will actually be charged on a variety of goods and services such as foodstuff (excl. beverages), medicine, or construction work.
– The government proposes that zero VAT apply to books.
– By contrast, the standard rate would newly apply to services such as the transport and disposal of communal waste, shoe repairs, cleaning services, the hairdressing trade, and others.
Property tax
– Increase of the property tax rate up to twice today’s rate.
– Introduction of automatic value indexation in the form of a so-called inflation coefficient.
Source:
Rescue package 2024/2025
Article on the website of the Czech Ministry of Finance