Machine Translation
The Czech media often report that the biggest legislative change in 2024 is the so-called consolidation package.[1] However, this is not entirely true, as there are many other innovations that are not to be overlooked.
1. Employment news
Minor changes to the Labour Code have already entered into force on 1 October 2023. You can read more about this here: https://www.hast-ak.com/pracovni-pravo/zmeny-v-pracovnim-pravu-platne-od-01-10-2023/
1.1. Holidays of employees working on the basis of agreements (FTE and FTE)
However, as of 01.01.2024, further changes will be added to this, in particular in the context of agreements held outside the employment relationship.[2] The Labour Code introduces the entitlement to paid leave for workers under a work performance agreement (WPA) and an activity performance agreement (APA). As long as the employment relationship lasts for a continuous period of at least four weeks and at least 80 hours are worked, these workers are entitled to holiday pay in the same way as regular employees.
1.2. Minimum and average wage
The minimum wage is increased to CZK 18,900.
The general assessment base has been set at CZK 40,638 by government decree[3] and the conversion coefficient at 1.0819. The average wage for 2024 is therefore CZK 43,967.
1.3. Allowance for meals
As of 01.01.2024, employer contributions for employee meals will be unified. The term “meal allowance” now includes both meal vouchers and meals provided at the workplace as well as a meal voucher lump sum. It is a part of an employee’s income that is exempt from tax if he or she has worked at least 3 hours during the shift and has not been entitled to a meal allowance under travel allowances.
The tax exemption for employees is limited to 70% of the upper limit of the meal allowance that the employer can provide for a business trip lasting between 5 and 12 hours. If the employee works more than 11 hours, the employer may provide a second meal allowance. If your employer provides an allowance that exceeds this limit, the excess will be income that your employer must tax and pay a contribution on.
1.4. Higher foreign boarding fees
As of 1 January 2024, there will be changes in certain rates of foreign meal allowances that are compulsorily paid by the employer when you are sent to work outside the Czech Republic. The rates of foreign travel allowances for 2024 are set by Decree No. 341/2023 Coll.
The changes concern countries such as Croatia (in 2023 the rate was EUR 40, from 2024 it will be EUR 45), Hungary (in 2023 the rate was EUR 40, from 2024 it will be EUR 45) or Spain (in 2023 the rate was EUR 45, from 2024 it will be EUR 50). Some rates in countries such as Germany or Austria remain the same (EUR 45).
1.5. Employee benefits
Restrictions on employee benefits are threatened by the effectiveness of the so-called consolidation package. As part of the tax adjustments, a limit was set for the tax deductibility of these types of employee benefits, up to one half of the average wage for a given tax period (in 2024, i.e. up to CZK 21,983). Benefits that exceed the limit will enter the employee’s tax base and will therefore be subject to health and social insurance contributions as well as personal income tax on employment, which is extremely disadvantageous for both parties.
1.6. Changes to the FKSP
As of 1 January 2024, the Cultural and Social Needs Fund (CSF) will be reduced by half, i.e. from 2% to 1% of the costs charged to salaries/wages. Another new feature is that at least half of the basic allocation to the fund will be mandatorily earmarked to support old-age security products for employees.
Currently, the amount of funds for the FKSP is set at 2% of the salary funds, which amounts to CZK 5.2 billion for 2023 only in regulated organisational units of the state and contributory organisations. The rules for the use of the FKSP will no longer be regulated by the Decree on the Cultural and Social Needs Fund, which will be repealed.
1.7. Cancellation of further agreed overtime in the health sector
As of 1 January 2024, the institute of additional agreed overtime work in the healthcare sector will be abolished. It will also be possible for selected employees in the healthcare sector to work up to 24 hours at a stretch under certain conditions. In this case, the employee will be guaranteed an immediate follow-up extended rest period (22 hours in the case of 24-hour work).
1.8. Reduction of home office compensation
In October 2023, an amendment to the Labour Code came into force, introducing rules for home office work. The legislator made it mandatory for employers to reimburse employees for costs related to their work at home – the so-called lump sum. This amount was set at CZK 4.60/hour, for 2024 this amount is set at CZK 4.45, after rounding to CZK 4.50/hour.
1.9. Change in the fight against illegal work
The labour inspectorate will be able to prohibit a given activity if it is proven that illegal work is being performed, and the labour inspectorate will also be able to use secondary sanctions (not providing benefits, not being able to employ foreigners). Furthermore, the liability for fines for illegal work will be extended so that it will not be profitable to circumvent the prohibition of illegal work through dubious subcontractors.
2. Change in the amount of compulsory contributions for self-employed persons
From the new year, the contributions of self-employed persons will increase. It is planned that in 2024-2026, the minimum assessment base for social insurance for self-employed persons will increase from 25% to 40% of the average wage, i.e. by 5 percentage points per year, bringing the minimum assessment base closer to the minimum wage. At the same time, self-employed persons will pay insurance premiums on at least 55% of the tax base instead of the current 50%. Both groups (employees and self-employed) are taxed equally at a tax rate of 15% for the tax base up to 36 times the average wage and 23% for the part of the tax base exceeding 36 times the average wage. For employees, the tax base is the so-called gross wage, while for self-employed persons the tax base is the difference between income and expenses.
Social insurance
The minimum monthly assessment base for the main activity for 2024 is 30% of the average wage, i.e. CZK 13,191. The minimum advance payment for the main activity is therefore now CZK 3,852.
The minimum advances for self-employed persons in secondary activities are now based on the assessment base corresponding to 11% of the average wage, i.e. on the amount of CZK 4837. The new amount of the advance payment is CZK 1,413.
The secondary activity will also not be conditional on receiving the so-called parental allowance. Self-employed persons will now carry out secondary activities on the grounds of childcare for children up to 4 years of age. Until now, the condition for the secondary activity was linked to the receipt of parental allowance. For the purposes of pension insurance, the age of the child being cared for is no longer relevant.
Sickness insurance
The minimum payment for sickness insurance for self-employed persons is set at 2.7% of the minimum assessment base and for this year it is CZK 216 per month.
Health insurance
The minimum deposit for self-employed persons carrying out their main activity is CZK 2,968 in 2024.
These changes in advances have also been reflected in the case of the flat-rate tax.
The payment for the first band increases by CZK 1,290 per month to CZK 7,498 (CZK 4,430 pension insurance + CZK 2,968 health insurance + CZK 100 income tax).
The payment for the second band increases by CZK 745 per month to CZK 16,745 (CZK 8,191 for pension insurance + CZK 3,591 for health insurance + CZK 4,963 for income tax).
The payment for the third band increases by CZK 1,139 per month to CZK 27,139 (CZK 12,527 for pension insurance + CZK 5,292 for health insurance + CZK 9,320 for income tax).
3. News in social security
3.1. Change in the internal structure of the Czech Social Security Administration and the creation of a new office “Institute for Health Assessment”
As of 01.01.2024, there has been a change in the internal structure of the ČSSZ, which will not affect the citizens of the Czech Republic, as all branches will remain unchanged. The change consists only in the administrative division of the ČSSZ.[4]
The Institute of Health Assessment will be based in Hradec Králové and its task will be:
- assess the health and working capacity of citizens;
- to recommend, as part of the medical check-up, the placement of individuals who have ceased to be disabled in vocational rehabilitation;
- notify the attending physician in writing that a citizen who is temporarily unable to work has been declared disabled as a result of a court action;
- to provide the basis for health assessments to the extent resulting from directly applicable European Union regulations and international treaties;
- cooperate with local social security administrations in providing expert assistance to citizens and employers.
This new office is intended to serve the purpose of unifying health assessments, as its main task will include the preparation of health assessments. The whole of the existing practice should therefore be speeded up and, in addition, it should ensure the flexible application of medical advances to the assessment practice.
3.2. Sickness insurance paid by the employee
The payment of sickness insurance directly by the employee is reintroduced. Previously, only the employer paid sickness insurance for the employee at the rate of 2.1%. From 01.01.2024, this part will be retained and a new contribution of 0.6% will be added by the employee himself.
3.3. Higher income replacement in case of incapacity for work
Similar to the reduction of earnings in the calculation of sick pay, the average hourly earnings are also adjusted when determining the amount of wage compensation for the first 14 days of temporary disability or quarantine. This is also not taken into account in full, but is reduced according to the hourly reduction thresholds, which increase from 01.01.2024:
- reduction limit to the amount of 1466 CZK
- reduction limit to 2199 CZK
- reduction limit to the amount of 4397 CZK
The new reduction thresholds also apply to the calculation of sickness insurance benefits for self-employed persons who have voluntarily registered for sickness insurance.
The consequence is a higher income compensation in case of temporary incapacity for work of the employee/employed person.
4. Health protection
4.1. Electronization of health care
From the new year, the electronization of health care is also continuing, with the deadline for the obligation to comply with e-health standards from 01.01.2025 and to use the e-health system from 1.1.2026, as this system is not yet in place.
4.2. Restrictions on the sale of tobacco and other products
When selling or in connection with the sale of tobacco products, smoking aids, herbal smoking products, e-cigarettes, e-cigarette refills or nicotine sachets without tobacco content in shops, it is now prohibited to offer or provide any economic advantage to the consumer, including benefits by means of vouchers, discount offers, provision of any goods or services free of charge or at a lower than normal price.
The prohibition also applies to the provision of economic benefits to a consumer for the recommendation of tobacco products, smoking aids, herbal smoking products, electronic cigarettes, electronic cigarette refills or nicotine sachets without tobacco content to another consumer.
It is prohibited to provide tobacco products, smoking aids, herbal smoking products, electronic cigarettes, electronic cigarette refills or nicotine sachets without tobacco content free of charge or as another benefit in connection with the sale of any goods or services.
5. New Building Act
Finally, after several years, the new Building Act No. 283/2021 Coll. will come into force in its complete wording. A smaller part will be effective as of 01.01.2024, the rest will be effective half a year later as of 01.07.2024.[5]
In addition to the new form of the Construction Act, the so-called unified environmental opinion is also coming into force, which will be issued instead of up to 26 different opinions, decisions or statements that have so far had to be completed as part of the environmental impact assessment of various projects. This should simplify the overall administration related to the permitting of buildings.
6. Taxes
Not only as a result of the so-called consolidation package, there is a big change in the tax area.
6.1. Income tax
There are significant changes to this tax.
First of all, several tax rebates are being abolished, namely for the placement of a child in a pre-school institution (the so-called nursery fee) and for a student. In the case of the spouse discount, there is an additional condition that must be met, namely that the person to whom the discount applies must be caring for a child under the age of 3 to qualify for the discount.
Furthermore, certain deductions from the tax base are also abolished:
- for union dues;
- for payment of examinations verifying the results of further education.
The change in the deduction from the tax base also applies to Pillar III retirement savings and life insurance products. Payments for retirement savings and life insurance will be deductible from the tax base up to CZK 48,000, with the proviso that other payments for state-supported retirement savings products (so-called long-term investment products = LTIPs) will also be included in this limit. LTIPs include, among others, shares, bonds, mutual fund investments, savings or time deposits offered by banks and securities dealers. The so-called long-term care insurance is also newly emerging. This new product is designed to cover the risk of you or a loved one becoming dependent on another person to help them manage the basic needs of life due to (long-term) ill health.
Changes are also being made to the taxation of company cars, which are used for private purposes in addition to company cars. This is non-cash income, which the employer taxes at 1% of the entry price of the car for each month, the minimum amount being CZK 1,000. If the employee receives a low emission car from the employer, then only 0.5% of its purchase price per month is taxed.
As of 1 January 2024, a new concept is introduced, the so-called zero-emission vehicle, which uses electricity or hydrogen for its propulsion or has no CO emissions2 . In this case, the employer will tax this income at only 0.25% of the entry price of the car for each month. If the employee has more than one car at the employer’s disposal, including for private use, then the tax is levied at a given percentage of the highest entry price of each car. If the employee can use several cars at the same time in one month, the non-cash income will be the sum of the amounts corresponding to the given percentage of the entry price of each car available for use.
Another novelty is the introduction of a higher personal income tax rate for people with an income of three times the average wage – approx. CZK 131,901/month (until 2023 it was up to four times the average wage), where the rate will be 23%.
A change is introduced in the corporate income tax rate, which increases from 19% to 21%. The change applies only to income for the year 2024. In addition, some tax benefits are also reduced, such as the tax deductibility of the purchase of passenger cars for business purposes, which now apply only to the first CZK 2,000,000 of the car’s price. Also, a gift of up to CZK 500 in the form of so-called “silent wine” is no longer tax deductible (although the zero excise duty rate for silent wine remains).
6.2. Property tax
Due to the effectiveness of the so-called consolidation package, the land, building and unit tax rates will increase by approximately 80% compared to 2023. There is also an increase in the tax rate per 1 m2 of built-up area for each additional storey (for 2023 the rate will increase by CZK 0.75 for each additional storey, in 2024 by CZK 1.40). Due to these changes, the taxpayer does not have to file a new tax return, the tax office will send the new amount to the taxpayer by 31 May 2024 at the latest.
Furthermore, an inflation coefficient is introduced, which will be used to multiply the resulting tax on land and on buildings and units each year.
For agricultural land, the inflation coefficient is always 1.0 because inflation is already taken into account when determining the tax base for such land. The change in the inflation coefficient will be announced by the Ministry of Finance in the form of a notice published in the Collection of Laws and International Treaties by 30 June of the calendar year immediately preceding the tax period. The inflation coefficient may be increased by a maximum of 20% (i.e. by one fifth) year on year. For the 2024 tax year, the inflation coefficient is set at 1.0 on the basis of the transitional provisions of the Real Estate Tax Act. If the inflation coefficient is changed, the taxpayer is not obliged to file a tax return, the tax administrator will recalculate the tax by the inflation coefficient ex officio and determine the tax by means of a mass prescription list and inform the taxpayers of the new tax amount according to the method chosen by them – by e-mail, data box, postal order or SIPO payment.
In addition, the tax on rooms in dwelling houses and dwelling units used for the accommodation business is increased. These are residential buildings, part of which is rented out to third parties. Taxpayers who provide accommodation in certain rooms or flats in a residential building, regardless of the fact that they have a decision from the building authority on the change of use of the building, but do not allocate the entire residential building with a business tax rate because more than half of the floor area of the building is used for housing, are obliged to submit a real estate tax return for the 2024 tax year, in which they must indicate the increase in tax for rooms used for business accommodation.
Situations where a certain room of a family house is used for living and business purposes at the same time remain outside the tax increase. For example, a seamstress or a tailor uses the living room not only for living but also for business during the day, as they sew and test in it, or an IT developer programs on a computer in his bedroom.
Taxpayers who have already indicated a tax increase for the 2023 tax year for a residential building do not need to file a real estate tax return for the 2024 tax year due to the change in the tax increase. The tax administrator will recalculate the tax increase ex officio based on the transitional provisions of the Real Estate Tax Act.
Furthermore, garages will be taxed according to the entry in the Land Registry. Nothing will change for garages not registered in the cadastre.
As of 1 January 2024, water areas will be completely excluded from the subject of real estate tax. Compared to the current situation, ponds used for intensive and industrial fish farming will no longer be subject to the tax. As a result of this change, the taxpayers concerned will not be obliged to submit a tax return.
A new reduced rate for unusable land is also being introduced. Land of the type “other area” with the land use type of barren land, waterlogged area, border, hillside or green area will be classified as “unusable other areas” from 1 January 2024, i.e. the taxation period of 2024, and the tax rate of CZK 0.08 per m2 will apply to them. This will reduce the taxation on these plots compared to the current situation. The municipality will be able to completely exempt these plots and plots with the use of other areas from the tax by a generally binding decree. The taxpayer does not have to file a tax return as a result of the change.
More on the property tax changes 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
Perhaps one of the biggest changes has been in the area of value added tax (VAT). Of the three rates, only two have been introduced, the basic rate of 21% and the reduced rate of 12%.
The harmonisation of the reduced rates results in a drop in tax from 15% to 12% on, for example, food without beverages, medical devices, construction work, child car seats or funeral services.
The tax rate was also increased (from the original 10% to the new 12%), e.g. for water and sewerage charges, public transport, and medicines. Magazines and newspapers, cultural and social events, restaurants and pubs and accommodation.
Books that are zero-rated for VAT have a special rate.
A more detailed summary of the VAT changes can be found here: https://www.behounek.eu/l/dph-sazby/
6.4. Bookkeeping in foreign currency
From 1 January 2024, companies that have most of their transactions in a foreign currency will be able to keep their accounts in a functional currency (EUR, USD, GBP) and file their tax returns and pay tax in that currency.
More tax changes here: https://www.mfcr.cz/cs/ministerstvo/media/tiskove-zpravy/2023/prehledne-ktere-zmeny-prinese-rok-2024-nejen-pro-o-54178
7. Other changes
From 01.01.2024 other changes will come into force, such as:
- a major amendment to the Civil Registration Act;
- changes in the area of job placement;
- regular indexation of pensions (specifically, increases in the basic rate);
- an increase in the special pension allowance;
- change the amount of parental allowance;
- tightening the conditions for unemployment benefits;
- valorisation of annuities or care allowances;
- change in state contributions for pension savings in Pillar III and reduction of state support for building savings;
- changes in job vacancies;
- increase in the price of regulated electricity and gas and refund of the Renewable Energy Sources Charge (RESC);
- the conditions for the creation of an ESG sustainability report under the Auditors Act are established;
- new rules for mortgage repayment;
- introduction of the eDocuments app, where you can keep your ID card or driving licence on your mobile phone;
- cancellation of the large motor vehicle licence and replacement by another document;
- increase of the limit for damage to health and property for compulsory liability insurance from CZK 35,000,000 to CZK 50,000,000 and the obligation to have compulsory liability insurance for vehicles with a design speed of more than 25 km/h and an operating weight of more than 25 kg;
- Changes to the road points system and the system of imposing fines for traffic offences;
- New rules for heat distribution in centrally heated houses;
- Fines, fines and compensation for costs imposed in favour of the State are now enforced by the Customs Administration.
This list is not definitive, and several dozen laws (or amendments to laws) came into force with the new year.
8. And what can we look forward to during 2024?
In March 2024, we will see an increase in the fee for the vignette for cars to CZK 2300 (1 year), CZK 430 (30 days), CZK 270 (10 days), CZK 200 (1 day). Cars running on natural gas or biomethane have lower prices (1150 CZK, 210 CZK, 130 CZK, 100 CZK).
As of July 2024, the second part of the amendment to the Labour Code will come into force, which introduces the participation in social and health insurance for employees working on the basis of work performance and activity agreements if the aggregate of all countable income exceeds a decisive amount. Employers will also be obliged to keep records of their employees working on the basis of agreements.
The so-called electronic warrant block will be newly introduced, which can be imposed on a legal entity or a natural person doing business in the event of an offence on the spot. Until 30.06.2027, however, only the Police and the customs administration can issue the electronic block.
On 01.07.2024 another part of the Building Act will come into force.
Any registry office will now be able to issue a civil registration document. However, a verbatim extract from the civil registry will be made only by the competent civil registry office. This will be accompanied by the possibility of issuing documents in electronic form.
In October 2024, the requirement that an insured person must have at least 40 years of insurance to retire early will begin to apply….
[1] Act No. 349/2023 Coll.
[2] Agreement on the performance of work and agreement on the performance of activities.
[3] Government Regulation of the Czech Republic of 13.09.2023, No. 286/2023 Coll.
[4] For more information 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 exact application of the law, we refer to Section 334a of Act No. 283/2021 Coll.
