Significant tax changes are currently being discussed in the Czech Republic as a part of the consolidation of public finances. We would like briefly to inform you about the most important of these.
Corporate Income Tax
– An increase in the corporate income tax rate from 19% to 21%
– Limitation of the tax deductibility of selected costs (e.g., a limit on the purchase price of cars etc.)
Personal Income Tax
– Reintroduction of sickness insurance paid by the employee at a rate of 0.6%
– Abolition of the exemption for most of non-monetary benefits to employees
– Abolition of exemption for meal vouchers over the statutory limit
– Reduction of the threshold for application of the 23% personal income tax rate – an amount exceeding three times the average wage should already be taxed by 23% instead of the current four times.
– The government intends to set a limit for tax exemptions from a sale of shares and other securities held for more than 3 years by an individual and from a sale of shares in a limited liability company held for more than 5 years by an individual. Tax-exempt income from such sale should be limited to CZK 40 million. Regarding the proposed changes, it is worth reflecting on the current structure of shares held directly by an individual.
Value Added Tax
– Merging of two reduced VAT rates (10% and 15%) into one 12% rate and transfer of selected goods and services from the reduced to the basic VAT rate
Real Estate Tax
– An increase of real estate tax rates up to double and the introduction of automatic indexation of tax liability in accordance with inflation
Insurance Contributions for Self-Employed Persons (Freelancers)
– The government proposes an increase of the assessment base for social security and health insurance for self-employed persons to at least 55% of the tax base instead of the current 50%.
– Moreover, the minimum assessment base for social security contributions of the self-employed persons should be increased from the current 25 % to 40 % of the average wage.
Further, an increase of taxes in the area of excise tax (tobacco) is planned.