The Czech media often express the view that the biggest legislative change in 2024 will be the so-called consolidation package.^[1] However, this assessment falls short, as numerous other legal changes will also come into force that will have considerable practical relevance.

1. Changes in the area of employment

Minor amendments to the Labour Code came into force on 1 October 2023. Further details can be found here: https://www.hast-ak.com/en/labour-law/zmeny-v-pracovnim-pravu-platne-od-01-10-2023/

1.1. Employees’ holiday entitlement based on agreements (DPP and DPČ)

Further amendments will come into force on 1 January 2024, in particular for agreements outside of a traditional employment relationship.^[2] In future, the Labour Code will also grant employees with a contract for work (DPP) or a service contract (DPČ) entitlement to paid leave. The prerequisite is that the employment relationship has existed for at least four weeks without interruption and at least 80 hours have been worked. In this case, these employees have the same holiday entitlement as regular employees.

1.2. Minimum and average wage

The minimum wage will be increased to CZK 18,900.

The general assessment basis was set at CZK 40,638 by a government decree^[3] , with a conversion factor of 1.0819. This results in an average wage of CZK 43,967 for 2024.

1.3. Subsidies for meal costs

From 1 January 2024, employer contributions for employee meals will be standardised. The term “meal allowance” will in future cover meal vouchers, meals provided at the workplace and lump sums for meal vouchers. These allowances count as part of the employee’s income, but remain tax-free provided that the employee has worked for at least three hours during their shift and was not entitled to a meal allowance as part of their travel expenses.

The tax exemption is limited to 70% of the upper limit of the meal allowance that the employer may grant for a business trip of 5 to 12 hours. For working hours exceeding 11 hours, the employer may also grant a second flat rate for meal breaks. Allowances exceeding these maximum amounts are considered taxable income for which the employer must pay tax and social security contributions.

1.4. Increased foreign meal allowance

From 1 January 2024, changes will come into force in the daily rates for foreign travel that employers must pay when sending employees outside the Czech Republic. The rates for 2024 are set out in Regulation No. 341/2023 Sb.

The adjustments affect Croatia (from EUR 40 to EUR 45), Hungary (from EUR 40 to EUR 45) and Spain (from EUR 45 to EUR 50), among others. In countries such as Germany and Austria, however, the rates remain unchanged at EUR 45.

1.5. Employee benefits

As part of the so-called consolidation package, there is a threat of a limit on the tax recognition of employee benefits. For 2024, an upper limit of half the average wage, i.e. up to CZK 21,983, has been set. Benefits exceeding this limit will be included in the employee’s tax base and will therefore be subject to income tax and health and social security contributions, which is disadvantageous for both employers and employees.

1.6. Changes to the FKSP

From the 1^st of January 2024, funding for the Cultural and Social Needs Fund (FKSP) will be reduced by half, from 2% to 1% of wage and salary costs. Another new feature is that at least half of the basic allocation must be used to promote employee pension products.

Currently, the FKSP funds amount to 2% of the wage bill, which in 2023 will amount to CZK 5.2 billion in regulated state organisations and subsidised institutions alone. In future, the rules for the use of the FKSP will no longer be laid down in the current Regulation on the Fund for Cultural and Social Needs, as this will be repealed.

1.7. Abolition of additional overtime regulations in the healthcare sector

From the 1^st of January 2024, the regulation on additionally agreed overtime in the healthcare sector will be abolished. At the same time, selected employees will be allowed to work up to 24 hours at a stretch under certain conditions. In this case, they are guaranteed an immediately following extended rest period of 22 hours.

1.8. Reduction in remuneration for home office work

In October 2023, an amendment to the Labour Code came into force, introducing regulations for working from home. According to this, employers are obliged to reimburse employees for the costs incurred by working from home in the form of a flat-rate allowance . This was previously CZK 4.60 per hour; for 2024, it is calculated at CZK 4.45 per hour and rounded to CZK 4.50 per hour.

1.9. Changes in the fight against undeclared work

The labour inspectorate may prohibit an activity, if it is found that undeclared work is being performed. It is also authorised to impose secondary sanctions, such as the withdrawal of subsidies or a ban on employing foreigners. In addition, liability for fines in connection with undeclared work is being extended to prevent the ban from being circumvented through the use of dubious subcontractors.

2. Change in compulsory contributions for self-employed persons

From 2024, social security contributions for the self-employed will be increased. The plan is to gradually raise the minimum assessment basis for the years 2024 to 2026 from 25% to 40% of the average wage, by 5 percentage points per year, bringing it into line with the minimum wage. In addition, self-employed persons will in future pay at least 55% of the tax assessment basis as social security contributions, instead of the current 50%. Both employees and self-employed persons are subject to the same tax rate: 15% on the tax base up to 36 times the average wage and 23% on the portion above that. While the tax base for employees corresponds to their gross salary, for self-employed persons it is the difference between income and expenses.

Social security

The minimum monthly assessment basis for self-employed persons in their main occupation will be 30% of the average wage, i.e. CZK 13,19 for 2024. This results in a new minimum advance payment for social security contributions of CZK 3,852.

The minimum advance payments for self-employed persons with secondary employment will in future be calculated on the basis of an assessment basis of 11% of the average wage, i.e. CZK 4,837. This results in a new minimum advance payment of CZK 1,413.

In future, secondary employment will no longer be linked to the receipt of parental allowance. Self-employed persons can now take up secondary employment to care for children under the age of four. For pension insurance purposes, it is no longer the receipt of parental allowance that is decisive, but the age of the child being cared for.

Continued pay/sick pay insurance

The minimum payment for health insurance for self-employed persons is 2.7% of the minimum assessment basis and amounts to CZK 216 per month for 2024.

Health insurance

The minimum advance payment for self-employed persons in their main occupation is CZK 2,968 for 2024.

These adjustments to advance payments also affect flat-rate taxation.

The payment for the first level increases by CZK 1,290 per month and now amounts to CZK 7,498 (CZK 4,430 for pension insurance, CZK 2,968 for health insurance and CZK 100 for income tax).

The payment for the second tier increases by CZK 745 per month to CZK 16,745 (CZK 8,191 for pension insurance, CZK 3,591 for health insurance and CZK 4,963 for income tax).

The payment for the third tier increases by CZK 1,139 per month to CZK 27,139 (CZK 12,527 for pension insurance, CZK 5,292 for health insurance and CZK 9,320 for income tax).

3. Changes in the area of social insurance

3.1. Changes in the internal structure of the Czech Social Security Administration and establishment of the “Institute for Health Assessment”

The internal structure of the ČSSZ has been adjusted since the 1^st of January 2024. This has no impact on citizens of the Czech Republic, as all branches remain unchanged; only the administrative structure of the ČSSZ is affected.^[4]

The Institute for Health Assessment will be based in Hradec Králové and will perform the following tasks:

Assessment of the health status and working capacity of citizens;
Recommending vocational rehabilitation as part of check-ups for persons who are no longer considered disabled;
Providing written information to the attending physician if a citizen who is temporarily unable to work has been recognised as disabled in the course of legal proceedings;
Providing documentation for health assessment in accordance with directly applicable European Union regulations and international treaties;
Cooperation with the territorial social security authorities to provide technical support to citizens and employers.

The aim of the new authority is to standardise health assessments. Its core tasks include the preparation of health reports, which should speed up current practices and ensure the flexible application of medical advances in assessment practices.

3.2. Health insurance payable by the employee

Direct payment of health insurance by the employee will be reintroduced. Previously, the employer alone paid a contribution of 2.1% for the employee. From the 1^st of January 2024, this employer contribution will remain in place and will be supplemented by an employee contribution of 0.6%.

3.3 Increase in income replacement benefits in the event of incapacity for work

Similar to the calculation of sick pay, the average hourly wage for determining wage compensation in the first 14 days of temporary incapacity for work or quarantine will also be adjusted. The hourly wage will not be taken into account in full, but will be reduced in accordance with the hourly maximum assessment limits, which will apply as follows from 1 January 2024:

First maximum assessment limit: CZK 1,466
Second maximum assessment limit: CZK 2,199
Third maximum assessment limit: CZK 4,397

The new maximum assessment limits also apply to the calculation of sick pay for self-employed persons with voluntary health insurance. This increases the income replacement benefit in the event of temporary incapacity for work for both employees and self-employed persons.

4. Health protection

4.1. Digitalisation of the healthcare system

From the new year onwards, the digitisation of the healthcare system will continue, with the obligation to comply with e-health standards set for the 1^st of January 2025 and the mandatory use of the e-health system set for the 1^st of January 2026, as the system has not yet been put into operation.

4.2. Restrictions on the sale of tobacco products and other products

When selling tobacco products or in connection with their sale, smoking accessories, herbal products for smoking, electronic cigarettes, refill packs for e-cigarettes or nicotine-containing pouches without tobacco, it will be prohibited in future to offer or grant economic advantages to consumers. This includes, in particular, vouchers, discount campaigns and the provision of goods or services free of charge or at a lower than usual price.

The ban also extends to granting economic benefits to consumers for recommending tobacco products, smoking accessories, herbal products for smoking, electronic cigarettes, refill packs for e-cigarettes or nicotine pouches without tobacco to other consumers.

It is prohibited to offer tobacco products, smoking accessories, herbal products for smoking, electronic cigarettes, refill packs for e-cigarettes or tobacco-free nicotine pouches free of charge or in the form of other benefits in connection with the sale of goods or services.

5. The new building act

After several years, the new Building Act No. 283/2021 Sb. is now fully in force. A smaller part will take effect on the 1^st of January 2024, while the remaining part will not take effect until the 1^st of July 2024.^[5]

In addition to the revision of the Building Act, the so-called unified environmental impact assessment will also come into force. It replaces up to 26 previously required statements, decisions or comments in the context of the environmental impact assessment of various projects. This is expected to significantly simplify the administrative procedure in connection with building permits.

6. Taxes

Tax law is undergoing significant changes, not only as a result of the so-called consolidation package.

6.1. Income tax

This tax reform will bring about significant changes.

Firstly, several tax breaks will be abolished, including those for placing children in pre-school facilities (known as kindergarten fees) and for students. An additional requirement has also been introduced for the tax break for wives: the beneficiary must be caring for a child under the age of three in order to claim the break.

In addition, some deductions from the tax base will also be abolished:

for membership fees to trade unions
for the costs of examinations to verify further training results

The changes to tax deductions also affect third pillar pension products and life insurance policies. Payments for pension plans and life insurance policies can be deducted from the tax base up to an amount of CZK 48,000. This maximum amount also includes other payments for state-subsidised pension products (so-called long-term investment products, DIP). Among other things, DIPs include shares, bonds, investment funds, savings accounts and fixed-term deposits offered by banks or securities dealers. Long-term care insurance has also been newly introduced. This product is designed to cover the risk that you or a close relative may be dependent on the help of third parties to meet basic living needs due to a (long-term) health impairment.

Changes also affect the taxation of company cars that are used for both business and private purposes. This is a monetary benefit that the employer taxes at 1% of the purchase price per month, with a minimum amount of CZK 1,000. In the case of a low-emission vehicle owned by the employee, however, only 0.5% of the purchase price per month is taxed.

From the 1^st of January 2024, the new term “zero-emission vehicle” will be introduced. This includes vehicles that run on electricity or hydrogen and do not produce any CO₂ emissions. In this case, the employer taxes the monetary benefit at only 0.25% of the purchase price per month. If the employer provides the employee with several vehicles for private use, the tax is calculated on the basis of the highest purchase price of the individual vehicles. If the employee can use several vehicles at the same time within a month, the monetary benefit corresponds to the sum of the amounts corresponding to the percentage of the purchase price of the vehicles provided for use.

Another change is the introduction of a higher income tax rate for people with an income three times the average wage – approximately CZK 131,901 per month. Until 2023, this rule only applied to incomes four times the average wage. The new tax rate is 23%.

The change affects the corporation tax rate, which will be increased from 19% to 21%. This rule will only apply to income earned in 2024. In addition, certain tax advantages will be restricted. For example, tax deductibility for the purchase of passenger cars for business purposes will in future be limited to the first CZK 2,000,000 of the vehicle price. Similarly, gifts for representation purposes up to an amount of CZK 500, for example in the form of so-called still wine, will no longer be tax-deductible, although the zero-excise duty rate for still wine will remain unchanged.

6.2. Property tax

Due to the effectiveness of the so-called consolidation package, the tax rate for land, buildings and units will increase by around 80% compared to 2023. In addition, the tax rate per square metre of built-up area will increase for each additional above-ground floor: For 2023, the increase was CZK 0.75 per additional floor; for 2024, it will be CZK 1.40. Taxpayers do not need to submit a new tax return as a result of these changes; the tax office will automatically notify them of the new tax amount by 31 May 2024 at the latest.

In addition, a so-called inflation coefficient will be introduced, which will be used to adjust the tax amount for land, buildings and units on an annual basis.

For agricultural land, the inflation coefficient is always 1.0, as inflation is already taken into account when determining the tax base for this land. Changes to the inflation coefficient will be announced by the Ministry of Finance in the form of a notice and published in the Official Journal and in the Register of International Treaties by 30 June of the calendar year preceding the relevant tax period. The inflation coefficient may be increased by a maximum of 20% (one fifth) year-on-year. For the 2024 tax year, the inflation coefficient is set at 1.0 in accordance with the transitional provisions of the Property Tax Act. If the inflation coefficient changes, the taxpayer is not required to file a tax return. The tax administrator will automatically recalculate the tax, determine it in a collective statement and inform taxpayers of the new tax amount via their chosen method – by email, data mailbox, post or SIPO payment.

In addition, the tax on rooms in residential buildings and residential units used for commercial purposes in the accommodation sector will be increased. This applies to residential buildings whose parts are rented out to third parties. Taxpayers who offer individual rooms or flats in a residential building for accommodation purposes – regardless of whether they have a building authority permit to change the use of the building – must submit a property tax return for the 2024 tax year, unless they register the entire residential building at the commercial tax rate and more than half of the floor space continues to be used for residential purposes. The tax increase for the commercially used rooms must be stated in this tax return.

Apart from the tax increase, there are still cases where individual rooms in a single-family home are used for both residential and business purposes. For example, tailors use the living room during the day not only for living, but also for business activities such as sewing or fittings. Similarly, IT developers may use part of their bedroom for professional purposes, such as programming on a computer.

Taxpayers who have already declared the tax increase for residential buildings for the 2023 tax year do not need to submit a new tax return due to the adjustment of the tax for 2024. The tax administrator will recalculate the tax increase ex officio, based on the transitional provisions of the Property Tax Act.

Garages will continue to be taxed in accordance with their entry in the land register. There will be no changes for garages that are not entered in the land register.

From the 1^st of January 2024, water areas will be completely excluded from the basis of assessment for property tax. In contrast to the previous regulation, ponds used for intensive or industrial fish farming will therefore no longer be taxable. As a result of this change, the taxpayers affected will no longer be required to submit a tax return.

Among other things, a new reduced tax rate will be introduced for unusable land. Land classified as “other areas” with the usage category of infertile land, wetlands, border meadows, slopes or green spaces will be classified as “unusual other asreas” from the 1^st of January 2024, i.e. in the 2024 tax period, and taxed at a rate of CZK 0.08 per m². This will reduce the taxation of these properties compared to the previous regulation. The municipality may completely exempt these properties and other properties in the “other area” category from tax by means of a generally binding regulation. Due to this change, the taxpayer is not required to file a tax return.

Further information on the changes to property tax can be found here: https://www.financnisprava.cz/assets/cs/prilohy/d-seznam-dani/Novela_zakona_o_dani_z_nemovitych_veci_zmeny2024.pdf

6.3. Value added tax

One of the most significant changes concerns value added tax (VAT). The three tax rates that previously applied will be reduced to two: the standard rate of 21% and the reduced rate of 12%.

The standardisation of reduced tax rates will see the tax reduced from 15% to 12% for certain goods and services, including food (excluding beverages), medical devices, construction services, child seats and funeral services.

The tax rate will increase from 10% to 12% for water, sewage, public transport, medicines, magazines and newspapers, cultural and social events, restaurants and pubs, and accommodation providers.

Books will continue to be subject to a special tax rate of 0%.

A detailed overview of the changes in the area of value added tax can be found here: https://www.behounek.eu/l/dph-sazby/

6.4. Accounting in foreign currency

Companies that conduct the majority of their transactions in foreign currencies will be able to keep their accounts in the functional currency (e.g. EUR, USD, GBP) from the 1^st of January 2024. At the same time, they will be able to submit their tax returns in this currency and pay their taxes accordingly.

Further changes in the area of taxation can be found here: https://www.mfcr.cz/cs/ministerstvo/media/tiskove-zpravy/2023/prehledne-ktere-zmeny-prinese-rok-2024-nejen-pro-o-54178

7. Further changes

Further changes will come into force on the 1^st of January 2024, including, among others:

Comprehensive amendment of the Civil Status Register Act;
Changes in the area of employment services;
Regular adjustment of pensions, in particular an increase in the basic amount;
Increase in the special pension supplement;
Adjustment of the amount of parental allowance;
Tightening of eligibility requirements for unemployment benefits;
Adjustment of accident pensions and care allowances;
Changes to state subsidies for third pillar pension provision and reduction in state support for building society savings agreements;
Changes in the area of job vacancies;
Increase in regulated electricity and gas prices and reimbursement of the renewable energy source fee (POZE);
Establishment of conditions for the preparation of a sustainability report (ESG) in accordance with the Act on Auditors;
New rules for mortgage repayments;
Introduction of the “eDoklady” application, which allows identity cards or driving licences to be stored on mobile phones;
Abolition of the large technical certificate for motor vehicles and its replacement with an alternative document;
Increase in motor vehicle liability insurance coverage for personal injury and property damage from CZK 35,000,000 to CZK 50,000,000, as well as the obligation to take out motor vehicle liability insurance for vehicles with a maximum design speed exceeding 25 km/h and an operating weight exceeding 25 kg;
Changes to the points system in road traffic and the system for penalising traffic offences;
New regulations on the billing of heating costs in centrally heated buildings;
Collection of fines, administrative penalties and reimbursement of procedural costs in favour of the state by the customs administration.

This list is not exhaustive, as several dozen laws and amendments will come into force in the new year.

8. And what can we look forward to in the course of the year?

In March 2024, the motorway vignette fee for passenger cars will increase to CZK 2,300 for one year, CZK 430 for 30 days, CZK 270 for 10 days and CZK 200 for one day. For vehicles powered by natural gas or biomethane, reduced prices of CZK 1,150, CZK 210, CZK 130 and CZK 100 will apply.

The second part of the amendment to the Labour Code will come into force in July 2024. It obliges employees working on the basis of contracts for work or services to participate in social and health insurance if the sum of all their eligible income exceeds a certain amount. Employers must also keep records of their contract-based employees.

A new feature is the introduction of electronic fines, which can be imposed on the spot-on legal entities or traders in the event of violations. However, until 30 June 2027, only the Czech police and customs authorities will be authorised to issue electronic fines.

On 1 July 2024, another part of the Building Act will come into force.

In future, birth certificates will be able to be issued by any registry office. However, a verbatim copy from the register will continue to be issued only by the competent registry office. At the same time, documents can now also be issued in electronic form.

From October 2024, the rule will apply that insured persons must prove that they have been insured for at least 40 years in order to take early retirement.

[1] Act No. 349/2023 Coll.

^[2] Agreement on the performance of work and agreement on the performance of activities.

^[3] Regulation of the Government of the Czech Republic of 13 September 2023, No. 286/2023 Coll.

^[4] More on the change in organisational structure: https://www.cssz.cz/-/zmeny-ve-strukture-ceske-spravy-socialniho-zabezpeceni-cssz-znamenaji-usporu-nakladu-mene-administrativy-vyssi-rychlost-i-rozsirene-moznosti-pro-klien.

^[5] For the precise application of the law, we refer to Section 334a of Act No. 283/2021 Coll.