Tax changes, news, practical information
Changes in Child Tax Allowance Rates
The Parliament of the Czech Republic passed a new amendment to the Income Tax Act that increases tax allowance on the second, third and further children. Compared to the previous situation, the tax credit for the second child increases by CZK 200 to CZK 1,617 per month (CZK 19,404 per month), the tax credit for the third child and further children increases by CZK 300 to CZK 2,017 per month (CZK 24,204 per year). The tax credit for the first child remains unchanged (CZK 1,117 per month/ CZK 13,404 per year).
The amendment became effective on 1 July 2017 and the increased rates will apply retrospectively for the whole 2017 taxation period in the form of additional settlement in the annual reconciliation of tax prepayments for 2017 or in the 2017 tax return.
Paternity leave is a newly introduced allowance in the system of sickness insurance that shall be effective from February 2018 (9 months after its publication in the Collection of Laws). Paternity leave will be provided to men registered in the birth registry as fathers or men that were acknowledged as foster parents by the court. Only men who have been participating in the sickness insurance system for longer than 3 months immediately prior to starting the paternity leave will qualify. Paternity leave will be provided to men during the first 6 weeks after the birth of the child or after accepting a child into foster care (in which case the allowance may be provided only to look after children under 7 years of age). The maximum length of the paternity leave is 1 week and may not be interrupted. The amount of the paternity leave allowance is the same as the amount of maternity leave, ie 70% of daily assessment basis. There will be a specific form to fill in for the claimants of paternity leave, however, it is not available as yet.
Changes in the Taxation of Income from Small-Scale Dependent Activities
The amendment to the Income Tax Act introduces further simplification of taxation of income from small-scale dependent activities. It will be possible to apply a withholding tax on income under CZK 2,500 per month (providing that the taxpayer does not sign the Taxpayer’s Declaration on the Income Tax). If taxpayers receive any other income categorised as negligible value income (eg participation in an election committee, witness fee in the case of employees) in addition to their income received from the employer in any month of the year, they will no longer have to file tax returns.
Employees receiving such secondary income will only present an annual tax reconciliation (unless they meet other conditions for a compulsory tax return, eg their income exceeds the solidarity tax).
Naturally, taxpayers will still have an option to file voluntarily a tax return in which the withholding tax will be included in the tax on the total annual income, which may be advantageous in certain cases. The change described above is expected to be effective from January 2018.
The Relevant Amount for Determining the Total Amount of Payroll Costs per Employee
In compliance with the Act on the Protection of Employees in the Event of Their Employer’s Insolvency, the Ministry of Labour and Social Affairs determined the relevant amount for determining the total amount of payroll costs per employee for the period from 1 May 2017 to 30 April 2018 to be CZK 27,589.
Assigning Employees – Amendment to the Employment Act and the Labour Inspection Act
With respect to the implementation of European standards into the Czech legal system, several changes regarding the obligations related to assigning employees to the Czech Republic are being made. An employer from another EU member state assigning its employees to the Czech Republic to perform work as part of cross-border provision of services is newly obliged to have copies of documents demonstrating the existence of a labour relationship available at workplace; these documents must be translated into Czech. In addition, the employer must be able to show compliance with the minimum statutory requirements under Czech labour regulations, including the minimum wage regulations (eg by means of payslips). Given that the Czech company to which employees were assigned to perform their work in the Czech Republic may be held liable, under specified terms, for a breach of those labour-law conditions, we recommend that compliance on the part of foreign partners and suppliers providing services in the Czech Republic by way of their assigned employees be supervised.
Proposed Extension of Tax Advantageous Employee Benefits
There have been considerations to include books into the group of tax advantageous benefits. The books could be included in the tax advantageous employee benefits only providing that they are not utilised as tax deductible items by the employers, or they are provided from a fund for cultural and social needs, or as the case may be, from the profit after tax. Thus, printed books where advertisement does not exceed 50% of their printed area should be exempt from taxation disregarding their topic or contents. It will be also possible to use vouchers or electronic systems (cafeteria) to buy these books. The act could become effective from 2018.