The Czech Parliament approved the long-awaited tax package of Law 609/2020 Sb. from 22.12.2020, which amends some taxation and other laws.
One of the most significant changes is the cancellation of super-gross wages “superhrubé mzdy”, which means an increase in net wages for all employed persons.
The wages of most employed workers in the Czech Republic from January 2021 will be taxed at a rate of 15% instead of the current 20.1%.
“This is a revolutionary tax cut and every month people will have thousands of extra crowns in their wallets. I am convinced that the crisis is the best time for this. People are investing in consumption or investing money, thereby contributing to a faster recovery of our economy,” says Finance Minister Alena Shillerova.
But employees with a higher level of income will have to pay a little more in taxes. The category of employees with a salary above 141 764 CZK a month will have to remit 23% from the part of their salary that exceeds the fixed amount, instead of the previous 22%.
A similarly significant change is the increase of the discount for all taxpayers. From 1 January 2021, the basic tax rebate for a taxpayer will increase from the current 24 840 CZK per year to 27 840 CZK, and in 2022 it is planned to increase to 30 840 CZK.
After long discussions, a decision to increase the minimum wage was reached. From January 2021, the minimum wage will increase from 14 600 CZK to 15 200 CZK. As for the minimum hourly wage rate, in 2021 it will be set at 90 50 CZK.
In return, changes of the minimum wage level affect other areas (benefits, rebates) and financial obligations, for example:
· The health insurance premium for a person without taxable income (self-payers) in 2020 was 1 971 CZK a month, in 2021 it increased to 2 052 CZK monthly, which calculates as 13.5% of the minimum wage.
· The discount on fees for attendance of a preschool institution (školkovné) in 2021 will calculate as 15 200 CZK for each child, which corresponds currently to one minimum wage.
· The changes will affect the income amount that has to be reached in order to be eligible for the child tax bonus. Parent’s income for 2021 has to be at least 6 times the minimum wage and be in the amount of 91 200 CZK. The right to qualify for a monthly tax bonus arises when receiving the income of at least half the minimum wage, that is 7 600 CZK a month.
· A pension is exempt by law from tax only if its size does not exceed 36 times the minimum wage. In 2021, this amount is calculated as 547 200 CZK per year, which corresponds to a monthly pension of 45 600 CZK.
· Persons registered as unemployed at an employment center and those not receiving unemployment benefits will be able to earn money, but their monthly earnings should not be more than a half of the minimum monthly wage, in 2021 it is set to be 7 600 CZK.
The tax package not only applies to an income tax reduction, to an increase in the tax rebate and to a rise of the minimum wage, but also:
· For employers, the Czech Parliament, within the tax package framework, proposed using a lump sum payment to workers for food. This means that the employer providing this benefit to its employees will be able to stop using the classic paper / electronic food stamps (stravenky) and begin directly paying the employees a sum that is not subject to taxes nor fees.
· The intangible assets amortization was canceled, increased the limit for classifying a tangible asset as fixed assets with mandatory depreciation from 40 000 CZK to 80 000 CZK and introduced an emergency accelerated amortization of tangible assets acquired in 2020 and 2021yy.
· Obtaining the right for Municipalities to increase the local property tax rate, for example, in industrial areas, and, thus, to replenish their budgets.
· Decreasing in the excise duty on diesel fuel by 1 CZK per liter will support not only transport companies, but also the entire Czech manufacturing industry.
· Increasing excise tax on tobacco. In 2021, the rate will increase by 10 % and in subsequent years by 5 %. A pack of cigarettes in 2021 will grow in price by about 8 CZK.
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