On May 11, 2023, the Czech Government presented a package of proposed changes aimed at stabilizing the government budget while curbing inflation.
Most of the changes should take effect from January 1, 2024.
List of selected proposals relating to taxation:
Corporate income tax
- Corporate income tax rate to increase from 19% to 21%;
- Value of passenger vehicles to be deductible for tax purposes limited to CZK 2 million;
- Still wine – as business entertainment gift valued under CZK 500 - no longer tax deductible.
Personal income tax
- Reduced limit for applying the higher personal income tax rate (23%) from 4 to 3 times the average wage;
- Exemption of proceeds from the sale of securities or shares reduced to CZK 40 million per taxpayer (provided the period from acquisition to sale is greater than 3 years and 5 years, respectively);
- Tax credit for a spouse reduced (only when caring for a child of up to three years of age);
- Kindergarten allowance abolished;
- Student tax credit abolished;
- Exemption of nonmonetary employee benefits revoked;
- Exemption of above-limit meal vouchers revoked;
- Exemption of income from raffles and games of chance reduced from CZK 1 million to CZK 50,000;
- Trade union fees no longer tax deductible.
Insurance
- Employee sickness insurance reintroduced – at a reduced rate of 0.6%;
- Minimum assessment base for social insurance premiums (contributions) payable by self-employed individuals to increase gradually from 25% of the average wage to 40% of the average wage;
- Limit for the percentage of the tax base for the calculation of insurance premiums payable by self-employed individuals to increase from 50% to 55%.
VAT
- Number of VAT rates reduced – 21% standard VAT rate and 12% reduced VAT rate;
- Selected products and services newly subject to the reduced VAT rate;
- New reduced VAT rate (12%) should apply to, for example, food other than beverages, pharmaceuticals, construction work, child car seats or funeral services;
- Standard VAT rate (21%) should newly apply to, for example, draft beer, newspapers, hairdressing services, municipal waste collection, transport and tipping, shoe repair services, cleaning services or firewood.
Excise tax
- Regular excise tax increases for cigarettes, smoking tobacco, cigars, and cigarillos by 10% in 2024 and by 5% annually during the period of 2025 – 2027; regular excise tax increases for heated tobacco by 15% annually during the period of 2024 – 2027; new excise tax introduced on nicotine pouches and e-cigarette cartridge refills;
- Excise tax increases for alcohol by 10% in 2024 and by 5% annually during the period of 2025 - 2027;
- Earlier return of excise tax on diesel fuel to the level existing prior to Russia’s invasion to Ukraine (ahead of January 1, 2024);
- Exemption of aviation fuel revoked;
- Refunds for “green diesel” according to regulations;
- Refunds for excise tax on mineral oils used during metallurgical and mineralogical processes revoked.
Energy taxes
- Exemption of metallurgical and mineralogical processes from tax on natural gas and some other gases, tax on solid fuels, and tax on electricity revoked.
Property tax
- Increase in the property tax rate (by as much as twofold) - fully for the benefit of the government budget;
- Introduction of automatic adjustments to tax liability based on inflation.
Gaming tax
- Increase in the second gaming tax rate from 23% to 30%.
