On 11 May 2023, the Czech government presented a public finance consolidation plan with the aim of reducing the public deficit.
This plan includes the following areas: corporate income tax, personal income tax, social security and healthcare, value-added tax (VAT), excise taxes, and other taxes.
CORPORATE INCOME TAX
Regarding this topic, the Government proposes an increase in the corporate income tax rate from 19% to 21%, aligning it with the European average. Additionally, the planned initiatives include tax deductibility of employee meal expenses, limitation of tax deductibility for the purchase of cars for professional use with a value equal to or greater than 2 million CZK, accelerated depreciation for electric cars starting in 2024, and cancellation of tax deductibility for gifts of still wine with a value of up to 500 CZK for representation purposes.
PERSONAL INCOME TAX
Regarding personal income tax, a shift in the 23% tax rate threshold is proposed. The category to which the 23% tax rate will be applied is for incomes exceeding 1,451,664 CZK instead of the previous 1,935,552 CZK. Another change relates to capital gains. The current exemption for income derived from the sale of securities up to 100,000 CZK is maintained, while a new limitation of 40,000,000 CZK is introduced for taxpayers who hold the participation for a qualified period between 3 and 5 years before selling it. Furthermore, the Government’s program includes the abolition of exemptions for non-monetary benefits and certain cash benefits, as well as changes to meal vouchers and meal allowances. Other points in the program include the elimination of tax credits (restriction of the spousal discount for those caring for a child under 3 years old, cancellation of the tax discount for enrolling a child in kindergarten, and cancellation of the student discount); elimination of withholding for union dues; a limit of 50,000 CZK for exemptions on other incomes; partial revocation of taxable income on gambling winnings.
SOCIAL SECURITY AND HEALTHCARE
The reintroduction of health insurance is proposed, with an amount of 0.6% of the gross salary for employees, and a voluntary increase of 0.6% of the taxable base for self-employed individuals who choose to join. In addition, a gradual increase in the minimum insurance premium for self-employed individuals is foreseen, from 25% to 40% of the average wage between 2024 and 2026. There will be an increase in the OSVC taxable base from 50% to 55%, and a modification of the DPP (public health insurance) with a limit of 25% of the average wage for a single employer and 40% of the average wage when combining multiple FTEs (full-time equivalents) with multiple employers.
VAT, EXCISE TAXES, AND OTHER TAXES
Regarding VAT, there is a consolidation of the reduced rates of 10% and 15% into a single reduced rate of 12%. The package includes the reclassification of certain services and goods from the reduced VAT rate to the standard rate, such as non-alcoholic beverages, draught beer, services for authors and artists, collection, transport, and storage of urban waste, repair of footwear, leather goods, and bicycles, cleaning services, firewood, and newspapers. Finally, it will be possible to deduct VAT for vehicles up to 2 million CZK. Changes to fuel, tobacco, and alcohol excise rates are also being considered. In conclusion, there is mention of doubling property taxes with adjustments for inflation, an increase in gambling taxes, and the revocation of the energy production exemption.
By Matteo Biagioni
Source: https://www.camic.cz/it/
Graphic source: https://storyset.com/
Source of Images: https://pixabay.com/
