What’s new in tax for employees in 2022?

With the new year come changes in the taxation of employees and social security and health insurance contributions. The basic tax relief per taxpayer has increased and the limit from which wages are taxed at 23% under progressive income taxation has been raised. Employed parents will be pleased about an increase in the tax credit for placing a child into pre-school facilities and the possibility to claim a higher tax credit for every dependent child and a tax bonus in their monthly wages already.

Here is an overview of the most important news for 2022:

The maximum annual assessment base for social security contributions has increased to CZK 1,867,728. This change will also affect personal income tax: employees' income exceeding this amount will be taxed at a 23% rate (for monthly wages, the threshold for the application of the 23% rate is CZK 155,644). Up to this limit, the 15% tax rate will continue to apply.

The basic tax relief per taxpayer has increased to CZK 30,840 (from CZK 27,840 in 2021). The monthly tax relief applied in the calculation of a tax prepayment will be CZK 2,570.

Higher monthly tax credits can be applied in monthly payroll processing from January 2022. Although higher amounts have been approved also for 2021, these will only be claimed in the annual settlement of income tax on wages or the tax return for 2021. The tax credit for the second child amounts to CZK 22,320 (i.e., CZK 1,860 per month) and CZK 27,840 (i.e., CZK 2,320 per month) for the third and any subsequent child. The tax credit for the first child for 2021 and 2022 remains at CZK 15,204 (i.e., CZK 1,267 per month).

From January 2022, the minimum wage increases by CZK 1,000 to CZK 16,200, which also affects the minimum monthly assessment base for health insurance. As a result, the tax credit for placing a child in a pre-school facility also increases to CZK 16,200 per year.

Another change occurred in the payment of the monthly tax bonus. The annual tax bonus limit was already abolished in the tax package in effect from 1 January 2021, but the limit for the calculation of monthly wages was maintained until the end of 2021. The tax bonus will therefore be payable for the first time in the monthly salary for January 2022. The tax bonus entitlement for 2021 will be settled in the annual settlement of income tax on employment (or in a tax return). To be able to claim the tax bonus, the annual income from employment or self-employment must be at least six times the minimum wage (i.e., CZK 97,200 for 2022). To qualify for the payment of a tax bonus on a monthly salary basis, the monthly income must be at least half of the minimum wage, i.e., CZK 8,100.

It will now also be possible to claim a tax credit for discontinued enforcement proceedings in the 2022 tax return or annual tax settlement. For more detailed information, see our article from September 2021.

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