Change in Progressive Taxation of Individuals
With effect from January 1, 2024, the threshold for progressive taxation of personal income will be set lower. Personal income is taxed at 15% or 23% depending on the amount of taxable income. Currently, the threshold for progression on an annual basis is 48-fold of the average wage, i.e., approx. EUR 79,456. From 2024, the tax rate of 23% will apply on the amount of annual taxable income above 36-fold of the average wage, i.e., EUR 64,976 for 2024.
Limitation of Tax-Free Income from Shares
With effect from January 1, 2025, and special regulations for 2024, there will be a new limit on the amount of what has until now been fully tax-free income from the sale of stocks and share in companies by individuals. Currently, if an individual holds stocks for more than 3 years or a share in a limited liability company for more than 5 years, the income from the sale of stocks / share in company is fully tax free. These kinds of income will be newly tax-free only up to CZK 40 million, i.e., approx. EUR 1,6 million.
Tax-Free Income up to CZK 50,000 (EUR 2,053)
With effect from January 1, 2024, a new annual tax-free limit of CZK 50,000 (EUR 2,053) will be introduced. This will apply for certain personal income that is now fully or partially tax-free. This tax-free limit will be applicable to certain types of so-called other income, e.g., lottery, income from sports event, occasional rental income or occasional income from the sale of own garden produce, etc..
Contributions for Employee Sickness Insurance
From January 2024, sickness insurance payments of 0,6% of gross income will be introduced on the employee contribution to social security. The amount of contribution on the part of the employer remains unchanged.
Non-Cash Benefits for Employees
With effect from January 1, 2024, particular non-cash benefits for employees will be tax-free up to the half of the average wage, i.e., for 2024 up to CZK 21,983 (i.e., EUR 902). The non-cash benefits exceeding this amount on an annual basis will be considered as taxable income of the employee including the obligation of contributions to social security and health insurance.
Taxation of Employee’s Share / Option Plans
It has been proposed that starting 2024, the non-monetary income from the gain of shares is not subject to PIT at the Vest Date. The tax is (among others) triggered only afterwards in the following cases (taxable moments):
- the end of employment relationship
- the employee (or the employer) becomes tax non-resident
- the employee transfers the shares to a third person
- after 10 years from the acquisition of the shares.
It has been proposed that the employee will have an obligation to notify the employer once the taxable moment arises. The legal employer is then obliged to tax the non-monetary income through the monthly payroll. It is irrelevant if the shares are provided by the legal employer, parent company, subsidiary or another capital-related company.
The status of the proposed amendment – approved by the Chamber of Deputies, to be discussed / passed by the Senate.