Changes in employee income taxation in 2024

Tax rate

The income threshold for applying the 23% tax rate has been reduced to 36 times the average wage on an annual basis (CZK 1,582,812) and three times the average wage on a monthly basis (CZK 131,901). A 15% rate will continue to apply to income below this threshold.

Tax exemption of leisure related benefits

Non-financial benefits provided to employees for their leisure activities (e.g., culture, sports, medical devices, books) are now exempt only up to half of the average annual wage, which is CZK 21,983.50 for 2024. Non-financial benefits above this limit are subject to tax and insurance contributions.

This limit does not apply to the non-financial income of employees and their family members from participation in an occasional sporting or cultural event organised by the employer if, given the nature of the event, it is customary for the employer to organise such events and that its form and scope are appropriate.

Meals for employees in non-financial form

For employees, the tax treatment of meal allowances provided both in financial and non-financial form has been unified: both forms are equally exempt from tax in aggregate up to 70% of the upper limit of the meal allowance that can be granted to employees for domestic business trips lasting between 5 and 12 hours. For 2024, an allowance of CZK 116.20 is thus exempt from tax. The exemption is conditional on the employee having worked at least 3 hours per shift, or at least 3 hours per calendar day for employees without set shifts (e.g., members of corporate bodies), and, simultaneously, no entitlement to a meal allowance having arisen to the employee as part of the travel allowance during their business trip. However, the employee shall be entitled to an additional tax-exempt allowance (in the same amount) if their shift including breaks in accordance with the Labour Code exceeds 11 hours in total (11 hours per calendar day for employees without set shifts).

According to the interpretation of the law, minor refreshments provided to employees for consumption at the workplace shall not be included in the limit for tax-exempt allowances.
 
Tax credits and items deductible from the tax base

Individuals will no longer be able to claim in their 2024 tax return or year-end settlement:

• membership fees paid to trade unions and fees paid for exams verifying the results of further education as items deductible from the tax base
• a tax credit for placing a child into pre-school facilities
• a tax credit for being a student (which can also no longer be claimed within the monthly payroll).

The tax credit for a dependent spouse will only be available from 2024 if the spouse has an income of up to CZK 68,000 per year and is also caring for a child under the age of three living in a jointly managed household.

Vehicles provided for employee’s business and private use

An employee’s taxable income is reduced where the employee is provided with an emission-free company vehicle for business and private purposes. The monthly taxable income is therefore determined as follows:

• 1% of the input cost of a vehicle
• 0.5% of the input cost of a low-emission vehicle
•  0.25% of the input cost of a zero-emission vehicle.

Lump-sum compensation for teleworking

The tax-exempt lump-sum compensation of expenses related to remote work (home office) which employers can provide in accordance with the Labour Code will be reduced from CZK 4.60 to CZK 4.50 per hour from January 2024.

Increase in the maximum annual assessment base

Unlike the reduction of the income threshold for applying the progressive tax rate, the maximum assessment base for social security contributions remains at 48 times the average wage, i.e., CZK 2,110,416 for 2024. Above this income, no social security contributions are payable by employees and employers.

Minimum wage increase

From January 2024, the minimum wage has increased from CZK 17,300 to CZK 18,900. Consequently, the minimum monthly assessment base for the payment of health insurance contributions for employees and the income threshold for the entitlement to a tax bonus for a child have also increased. The minimum guaranteed hourly wage has been increased to CZK 112.50.

Introduction of employee contribution to sickness insurance

Employees now contribute 0.6% of their assessment base to the sickness insurance scheme, resulting in an increase in their total social security and health insurance contributions from 11% to 11.6%.

Employer and employee contributions to private insurance products

Employers and individuals may contribute to two new tax-efficient insurance products – a long-term investment product and long-term care insurance.
If the conditions of the law are met, contributions to the following schemes will be tax-efficient:

• supplementary pension insurance with state contribution, additional pension savings and pension insurance 
• private life insurance
• long-term investment product
• long-term care insurance.

On the employee’s part, the total of the employer's contributions to all products not exceeding CZK 50,000 per year remains exempt from tax. Contributions paid during the year by individuals for specified products can be claimed in their tax return or year-end tax settlement in the total amount of CZK 48,000 per year.

Change in taxable moment for employee stock option plans

This income will now only be taxed at the time of sale/transfer of a share in a business corporation or of a transferable option by the employee.

Employees are now required to inform their employer of the transfer of a share or an option before the end of the calendar month in which the transfer took place so that employers can make relevant monthly payments.

However, the change affecting the point of time of taxation has not yet been reflected in laws regulating payments of social security and health insurance premiums.

Changes to travel allowance amounts

The rate of the minimum basic compensation for the use of a road motor vehicle during a business trip at the request of the employer has been increased. Meal allowances for domestic and some foreign business trips have also been increased.

The wording of the relevant decree can be found here. Decree No. 341/2023 Coll. sets the basic rates of foreign meal allowances for 2024 - available here.