The Czech Republic is set to implement significant changes to Agreements to Complete a Job (Dohody o provedení práce, DPP) starting January 1st, 2025. Published in November, the amendments aim to improve taxation and social insurance rules for DPP workers. These adjustments are informed by data gathered by the Czech Social Security Administration (ČSSZ) since mid-2024, highlighting the need to simplify processes while addressing administrative inefficiencies.
The changes focus on updating income thresholds for social security and health insurance contributions while removing unnecessary administrative complexities from earlier legislation. The new rules aim to provide clarity for both employers and employees while ensuring compliance and fairness in taxation and contributions.
Who Will Be Affected?
The amendment directly affects workers employed under DPP agreements. These agreements allow for flexible employment arrangements, limited to 300 hours per calendar year per employer, and must be outlined in a written contract specifying the job, duration, hours, and remuneration. While they provide flexibility, DPP agreements do not automatically include benefits such as holidays or sick leave unless explicitly agreed upon between the worker and employer.
Key Adjustments to Social Insurance and Taxation
A central feature of the new amendment is the revision of the income threshold for social security and health insurance contributions. Currently set at a fixed amount of CZK 10,000 per month, this threshold will be replaced with a dynamic one equal to 25% of the average salary. For 2025, this translates to CZK 11,500, according to Gabriela Ivanco, tax advisor at Forvis Mazars.
Under the new rules, DPP workers earning below this threshold will not be required to make social security or health insurance contributions. However, they must ensure they have alternative health insurance coverage, such as through self-payment or other qualifying arrangements. Earnings exceeding the threshold will be subject to mandatory contributions, granting workers access to public healthcare and other social benefits like pensions. Employers will remain responsible for registering DPP agreements with the ČSSZ to facilitate oversight and ensure compliance.
Simplifying Administration
The amendment also introduces measures to reduce administrative complexity for employers. It eliminates the previously proposed “announced agreement” system, which was considered impractical and burdensome. The revised framework goes back to more straightforward processes that align with pre-2024 principles, ensuring ease of implementation while maintaining essential compliance requirements for both parties.
New Rules for Withholding Tax
In 2025, changes will also affect withholding tax for income from non-employment relationships. For incomes exceeding the threshold for health insurance participation, set at CZK 4,500, withholding tax will no longer apply. Instead, such earnings will be subject to standard taxation rules. This represents an increase from the CZK 4,000 threshold in 2024. For executives, any remuneration overcoming this new limit will transition from withholding tax to standard income tax. These adjustments aim to align taxation rules with health insurance thresholds, ensuring consistency across systems.
Updates to Tax-Exempt Employee Benefits
The amendment also introduces refinements to the taxation of employee benefits, initially capped under a 2024 consolidation package. For 2025, exemption limits will vary based on the type of benefit:
- Health-Related Benefits: Expenses for medical goods, services, or equipment prescribed by a doctor will have a separate exemption limit equal to the full average salary. This translates to a tax-exempt value of CZK 46,557 in 2025.
- Other Benefits: Educational or recreational activities, preschool care, employer-provided libraries, cultural events, sports, and printed books will remain capped at half the average salary, equating to CZK 23,278.50 in 2025.
These adjustments are designed to simplify administration while maintaining clear thresholds for taxation and exemptions.
What Do These Changes Mean for Workers?
The 2025 amendments represent a shift toward a more practical and streamlined approach to DPP agreements. For workers, the new income thresholds reduce deductions for those earning below CZK 11,500 while ensuring essential benefits for higher earners. The alignment of withholding tax rules with insurance thresholds offers consistency, while adjustments to employee benefits provide clarity and targeted exemptions.
The upcoming changes to DPP rules reflect a broader effort to modernize employment regulations in the Czech Republic. By updating income thresholds and simplifying administrative requirements, the amendments balance worker protections with practical realities for employers. For those employed under DPP agreements, staying informed about these updates is essential to ensure compliance and fully benefit from the new system.
https://www.migrace.com/bx/en/1/55
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