On 11 May 2023, the Government of the Czech Republic presented a draft package of changes to stabilise the state budget while acting against inflation.
Most of these changes are proposed from 1.1.2024.
Overview of selected proposed changes in the area of taxation:
Corporate income tax
– Increase in the corporate tax rate from 19% to 21%.
– Limitation of the tax-applicable value of passenger cars to CZK 2 million.
– Cancellation of the tax deductibility of still wine as a gift up to CZK 500 for representation.
Personal income tax
– Lowering the threshold for applying the 23% personal income tax rate from 4 times the average wage to 3 times the average wage.
– Limitation of the exemption of income from the sale of a security or share in a company if the time test of 3 years, or 5 years between acquisition and sale, is met to the amount of CZK 40 million. CZK per taxpayer.
– Reduction of the spouse discount (only for caring for a child under three years of age).
– Abolition of nursery fees.
– Cancellation of the student discount.
– Abolition of the exemption of non-monetary benefits for employees.
– Cancellation of the exemption of above-the-limit meal vouchers.
– Reduction of the exemption of income from raffles and gambling from CZK 1 million. to CZK 50,000.
– Abolition of the deduction for membership fees to trade unions.
– Reintroduction of employee sickness insurance at a reduced rate of 0.6%.
– Gradual increase of the minimum assessment base for social insurance contributions for self-employed persons from the current 25% of the average wage to 40% of the average wage.
– Increase in the percentage limit of the tax base for calculating insurance contributions for self-employed persons from the current 50% to 55%.
– Reduction of the number of VAT rates to the basic 21% and a reduced 12%.
– Moving selected goods and services from the reduced to the standard VAT rate.
– For example, food without drinks, medicines, construction work, child car seats or funeral services should be subject to a new reduced VAT rate of 12%.
– For example, draught beer, newspapers, hairdressing services, beverages, collection, transport and landfilling of municipal waste, shoe repair, cleaning work or firewood should be transferred to the standard VAT rate of 21%.
– Regular increase in excise duty on cigarettes, smoking tobacco, cigars and cigarillos by + 10% in 2024 and by + 5% in each year 2025-2027. Regular tax increase on heated tobacco by 15% in each year 2024-2027. Introduction of a new excise tax on nicotine sachets and e-cigarette cartridges.
– Increase in excise duty on alcohol by + 10% in 2024 and by + 5% in each year 2025-2027.
– Faster return of excise duty on diesel fuel back to the original level before the Russian invasion of Ukraine earlier than 1.1.2024.
– Abolition of the aviation fuel exemption.
– Refunds for so-called green diesel according to normatives.
– Abolition of the refund of excise duty on mineral oils consumed in mineralogical and metallurgical processes.
– Abolition of the exemption of metallurgical and mineralogical processes from the tax on natural gas and certain other gases, the tax on solid fuels and the tax on electricity.
Real estate tax
– Increase of real estate tax rates up to twice for the benefit of the state budget.
– Introduction of automatic indexation of tax liability according to inflation.
– Increase in the second gambling tax rate from 23% to 30%.