Changes in employee taxation in 2025

Increases in maximum annual assessment base and threshold for applying progressive tax

For 2025, the maximum annual assessment base for social security contributions has been increased to CZK 2,234,736 (up by CZK 124,320 over the previous year). Once the income threshold is reached, no further social security contributions shall be paid by neither employee nor employer. At the same time, the threshold for the application of the 23% tax rate has been increased to an annual income of CZK 1,676,052, which corresponds to a monthly income above CZK 139,671. Income below this threshold will continue to be taxed at 15%.

Minimum wage increase

From January 2025, the minimum wage has been increased from CZK 18,900 to CZK 20,800 for a fixed weekly working time of 40 hours; the hourly minimum wage is CZK 124.40.

As a result, the minimum monthly assessment base for the health insurance of employees has also increased.

Changes to exemption of non-financial benefits

At the end of last year, an amendment to the Income Tax Act was approved singling out health-related benefits from employee benefits and setting a new limit up to which they are exempt from tax and social security and health contributions, at the amount of the average wage, i.e. CZK 46,557 for 2025.

The exemption limit for the remaining leisure-related non-financial benefits remains at 50% of the average wage, i.e. CZK 23,278.50 for 2025.

Benefits above these limits will be subject to taxation and social security and health insurance contributions.

Changes in domestic and foreign travel allowances

Decree No. 475/2024 as of 1 January 2025 increased the minimum basic compensation for the use of a passenger road motor vehicle on a business trip from CZK 5.60 to CZK 5.80 per km. Meal allowances for domestic business trips have also risen.

Decree No. 373/2024 Coll. has increased foreign meal allowances for some countries.

Lump-sum compensation for remote work

The lump-sum compensation for expenses related to remote work (home office), which employers can provide under the Labour Code, has been increased from CZK 4.50 to CZK 4.80 per hour.

Employee meal allowances

Both financial and non-financial allowances are exempt up to an aggregate of 70% of the upper limit of the meal allowance that can be provided to salaried employees for domestic business trips of 5 to 12 hours. For 2025, an allowance of CZK 123.90 is thus exempt.

The meal allowance exemption is nonetheless conditional upon the employee having worked at least three hours per shift; employees without a set shift (e.g. statutory bodies) must work at least three hours per calendar day. At the same time, employees must not be entitled to a meal allowance as part of a travel allowance. Employees will be entitled to an additional exempt allowance (in the same amount) if the total shift including breaks exceeds 11 hours (employees without a set shift must work at least 11 hours per calendar day).

The planned introduction of a notified agreement regime for agreements on work performed outside employment has been abolished.

Employers remain obliged to monthly report all employees working under such agreements to the Czech Social Security Administration. However, the limit for social security and health insurance contributions has been changed, as has the taxation of income from such agreements.

From 1 January 2025, the limit for social security and health insurance contributions for employees working under agreements to perform work has been set at 25% of the average wage, i.e. for 2025 at CZK 11,500. This limit also has an impact on withholding tax on the agreements: it will only apply if the income from the agreement does not reach this threshold and the employee does not sign a taxpayer’s statement.

Discount on social security premiums for working pensioners

From 2025, a discount on the social security premium at 6.5% of the employee's assessment base has been introduced for working pensioners receiving an old-age pension. Instead of the current rate of 7.1%, employers will only deduct 0.6%. The discount is intended to compensate working pensioners for the abolition of the possibility to increase their pension by the years worked after they began to draw their retirement pension. However, employers will continue to pay the employer's portion of social security contributions at the full rate of 24.8% of the working pensioner's assessment base.

Certain other changes to employee taxation expected in 2025 (e.g., changes to employee stock option plans) are pending in the senate.