Detailed Overview of Tax Changes in the Consolidation Package

12. 12. 2023

With the passing of the consolidation package, extensive tax changes will take place from January 1, 2024. Below we offer you an overview of the most important ones.

Corporate income tax

  • Increase in the tax rate from 19% to 21%.
  • As of 1 January 2024, only electric vehicles (emission-free vehicles) will be eligible for extraordinary tax deductibility.
  • For the purchase of passenger cars (category M1) for business purposes, only up to CZK 2 million can be deducted. In addition, for these vehicles acquired on finance lease, only partial tax deductibility of the instalments up to the statutory limit of CZK 2 million will be possible.
  • The tax deductibility of still wine as a gift up to CZK 500 is abolished.
  • A new option is given to exclude unrealized exchange rate differences from the tax assessment base in the period in which they arise (are recognized) and to generally (with certain exceptions) include them in the tax assessment base only in the period in which the exchange rate difference is realized (notification to the tax administrator of entry into this procedure is required).

Employees

  • Income in the form of non-cash “leisure” benefits will be exempt up to half of the average salary per employee per tax year. In 2024, the exempt amount will therefore be CZK 21,983. These are instances where the employer provides goods or services relating to health, sports, culture, education or recreation to the employee or a member of the employee's family.
  • The amount of the exemption for the meal allowance is being harmonized. The value of the meal allowance provided by the employer, if the employee has worked for at least 3 hours, is exempted up to an aggregate of 70% of the upper limit of the meal allowance that can be provided to employees remunerated by salary for a business trip lasting between 5 and 12 hours for both forms of meal allowance, i.e., a meal voucher or a cash allowance referred to as a "meal voucher" lump-sum amount. The meal allowance can now be provided to an employee regardless of whether or not his/her work is scheduled in shifts. Thus, a meal allowance may also be provided to an employee working from home who schedules his/her own work.
  • Abolition of the tax exemption for gifts to employees up to CZK 2,000 provided on occasions specified by the Cultural and Social Needs Fund (FKSP).

Personal income tax

  • The tax assessment base subject to the 23% rate is reduced to 36 times the average wage. For the year 2024, the tax assessment base of up to CZK 1,582,812 per year (CZK 131,901 per month) will be taxed at a rate of 15%; the portion of the tax assessment base exceeding this limit will be subject to a 23% tax rate. 
  • Abolition of certain deductible items and tax credits: the student discount and the so-called ‘kindergarten allowance’ are abolished. The spouse discount is now conditional on the care of a child up to the age of three. Furthermore, it will no longer be possible to claim a deduction from the tax assessment base for examinations verifying the results of continuing education or for a contribution to a trade union.
  • Income from the sale of securities, if the time test of three years for securities and five years for shares in companies is met, will be exempt only up to the amount of CZK 40 million per taxpayer per tax year as of January 1, 2025. Taxpayers will be able to expense the purchase price of non-exempt securities or shares on a pro rata basis. Special rules are laid down for determining the acquisition price of securities and shares acquired before December 31, 2024.

The Accounting Act

  • Entities may, subject to certain conditions, keep their accounts in the so-called functional currency, which may be the euro, the British pound or the US dollar in addition to the Czech crown.

  • New reporting obligations are introduced for selected entities, the so-called Sustainability Report and Income Tax Report.

Value-added tax

  • A single reduced rate of 12% is introduced. Value added tax has only two rates of 21% and 12% from 1 January 2024. Goods and services subject to the reduced rate are limited.
  • The VAT deduction for acquired vehicles in the M1 category will be limited to a maximum amount of CZK 420 thousand, i.e., from the threshold amount of CZK 2 million.

Property tax

  • Tax rates are increased, in average 1.8 times the current rates.

Excise and energy taxes

  • Excise duty on cigarettes, cigars and cigarillos and smoking tobacco is increased by 10% for the year 2024 and by 5% each year in the period from 2025 to 2027. A new tax on shisha tobacco will be introduced.
  • In addition, from 2024 to 2027, the excise duty on heated tobacco will be increased by 15% on a regular basis.
  • Introduction of excise duty on other tobacco products (chewing and snuff tobacco). The tax rate will be gradually increased over the period of 4 years following the pattern of CZK 0.4 - 0.8 - 1.2 - 1.7 per gram of tobacco contained in the product.
  • The excise duty on alcohol will be increased periodically over a period of 3 years (2024-2026), following the pattern of 10 + 10 + 5%. The amount of the security for the tax on alcohol for the tax warehouse operator is also increased.
  • The exemption for aviation fuel for any domestic transport is abolished.
  • Tax refunds on mineral oils used for metallurgical or mineralogical processes are abolished.

Gambling tax

  • For lotteries and technical games, the current rate of 35% is maintained. For other games of chance, the tax rate increases from 23% to 30%.
  • The minimum tax for gaming (gambling) machines is increased from the current CZK 9,200 to CZK 13,400.

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