The Ministry of Finance has prepared a number of innovations for 2024, not only in connection with the consolidation package. From next year, citizens will be able to use new products in pension savings, the obligation to print a green card will be abolished during the year and companies will be able to keep their accounts in foreign currencies.
Changes with effect from 1 January 2024:
Reduction of the threshold 23 % advance personal income tax rate from four times to three times the average wage
As of 1 January 2024, the income limit from which the 23% tax rate is paid will start at 3 times the average wage instead of 4 times the average wage. This expands the set of high-income taxpayers who pay the 23% income tax rate. This is a solidarity move to make high-income taxpayers also contribute more to the consolidation of public finances.
Currently, the employee pays 23% tax on income in excess of CZK 161,296. Up to this amount he pays 15% tax. The new amount will be approximately CZK 131 901.
Limitation of tax relief for spouse
From 1 January 2024, the tax credit for the second spouse in a joint household will be parametrically limited and will now apply exclusively to those who care for a child up to the age of 3. The main reason for the restriction is that the current set-up of the exemption discourages taxpayers from entering the labour market and starting significant gainful activity, as the entitlement to the discount ceases when the income threshold is exceeded.
Cancellation of the student tax credit
The main reason for the abolition of the student tax rebate as of 1 January 2024 is its low effectiveness in relation to classic students, for whom the standard tax rebate per taxpayer would in principle be sufficient, which fully eliminates taxation on earnings of CZK 205,600 per year, which corresponds to average monthly earnings of approximately CZK 17,100. This means that only those students who earn higher amounts will benefit from the additional student discount, while students with poor financial resources will not benefit from this discount at all. At the same time, the abolition of the student discount will contribute to reducing the undesirable situation where persons use the student status only formally (i.e. they are enrolled in studies but do not attend an educational institution).
Abolition of the so-called school fees
The main reason for the abolition of the tax rebate for placing a child in a pre-school establishment from 1 January 2024 is that the benefit is generally applied by middle- and high-income groups with a sufficiently high tax base, while low-income groups, such as single parents working part-time, will not use the benefit after applying other rebates, generally because of their low tax base. At the DPFO rate of 15 %, the amount of the basic tax rebate per taxpayer, i.e. CZK 30 840 per year, corresponds to a tax base of CZK 205 600. The monthly income is approximately at the level of the minimum wage for 2023. For these low-income groups of taxpayers, there is therefore no advantage to the education allowance because they cannot claim it due to the low tax rate. School fees are therefore a good example of how tax instruments are not always the most appropriate means of implementing social policy. It is envisaged that the capacity of pre-school facilities will be increased at the same time.
Limitation of exemption of non-cash benefits to employees
From 1 January 2024, all previously tax-exempt non-monetary benefits provided by the employer to the employee will be exempt from personal income tax for a given tax period on the part of the employee only up to half of the average wage (currently CZK 21,984 per year), which is calculated as the product of the general assessment base for the calendar year preceding by 2 years the calendar year for which the average wage is determined and the conversion coefficient for adjusting this assessment base. Employees will continue to be able to receive, for example, an allowance for trips, cultural or sporting events, printed books, etc. In the case of the employer's contribution to the employee's meals, the conditions for the exemption of such a contribution are unified, i.e. regardless of its form.
Changes to the FKSP
As of 1 January 2024, the appropriations or basic allocation to the Cultural and Social Needs Fund (CSF) will be reduced by half, i.e. from 2 % to 1 % of the costs charged to salaries/wages. It is also new that at least half of the basic allocation to the Fund will be mandatorily earmarked to support old-age security products for employees.
Currently, the volume of funds for the FKSP is set at 2 % of the volume of funds for salaries, which for 2023 amounts to CZK 5.2 billion only in regulated organisational units of the state and contributory organisations. The rules for the use of the FKSP will no longer be regulated by the Decree on the Cultural and Social Needs Fund, which will be repealed.
Adjustment of the levy burden on self-employed persons
In accordance with the recommendations of NERV and a number of other economic experts, the contributions of self-employed persons will be increased from 1 January 2024. Specifically, in the years 2024-2026, the minimum assessment base for social insurance premiums for self-employed persons will increase from 25 % to 40 % of the average wage, i.e. by 5 percentage points per year, which will bring the minimum assessment base closer to the level of the minimum wage. At the same time, self-employed persons will pay insurance premiums on at least 55 % instead of the current 50 % tax base. Both groups (employees and self-employed) are taxed equally at a tax rate of 15 % for the tax base up to 36 times the average wage and 23 % for the part of the tax base exceeding 36 times the average wage. For employees, the tax base is the so-called gross wage, while for self-employed persons the tax base is the difference between income and expenses.
| 2023 | 2024 | 2025 | 2026 | |
|---|---|---|---|---|
| Minimum assessment base | 25 % | 30 % | 35 % | 40 % |
| Calculation basis | 50 % | 55 % | 55 % | 55 % |
Real estate tax increase
Real estate tax rates will increase by an average of 80 % from 1 January 2024, with a positive impact on real estate tax collection of CZK 10 billion. As part of the increase in tax rates, the tax increase is also changed from CZK 2 to CZK 3.50 per 1 m2 non-residential space used for business. The new increase in the tax on buildings and units will also apply to all rooms in residential buildings and units (apartments) used for the accommodation business, regardless of whether it is non-residential space.
Furthermore, the minimum total tax for a co-ownership share of immovable property will be increased to CZK 90. At the same time, the minimum amount of tax that the taxpayer is obliged to pay is increased to CZK 50.
The tax burden on the real estate segment in the Czech Republic has been negligible for a long time, which was further highlighted by the abolition of the real estate acquisition tax in 2020. The share of the real estate tax revenue in the Czech Republic in the total tax revenue for 2020 amounted to 0.6 %, which ranked us 24th. At the same time, it had a negligible share of 0.2 % of GDP, which also ranked us 24th among EU countries (and 36th among 37 OECD countries with an average value of 1.8 % of GDP).
Introduction of an inflation coefficient
From 1 January 2024, an inflation coefficient is introduced to multiply the resulting land tax and the resulting tax on buildings and units. For agricultural land, the inflation coefficient is always 1, as inflation is already taken into account when determining the tax base for such land. The change in the inflation coefficient will be announced by the Ministry of Finance in a notice published in the Collection of Laws and International Treaties by 30 June of the calendar year immediately preceding the tax year. The inflation coefficient may be increased year-on-year by a maximum of 20 % (i.e. by one fifth). If there is no change in the inflation coefficient, no announcement is made in that year and the inflation coefficient remains the same for the following year.
For the 2024 tax year, the inflation coefficient is set at 1 and will not increase for 2025 due to the inflation rate.
Taxation of garages and buildings for family recreation on the basis of registration in the Land Registry
As of 1 January 2024, the buildings of garages and houses used for family recreation will be newly linked to the registration in the land register. Except where the immovable property is used for business, the actual use of the building will not be relevant and the building will be taxed according to the use registered in the Land Registry. A building registered in the Land Registry other than a building for family recreation or a garage will be taxed as another taxable building, even if it was previously taxed according to its use as a building for family recreation or as a garage. In the event that the building is not registered in the Land Registry at all, the actual use of the building will continue to be decisive.
Extension of the range of cases in which the user of immovable property will be the taxpayer of the immovable property
As of 1 January 2024, the user of immovable property will now also be a real estate taxpayer in cases where the owner of the taxable building or unit is not known or the immovable property is managed by the State Land Office or the Office for State Representation in Property Matters.
Exclusion of water areas from the subject of real estate tax
As of 1 January 2024, water areas will be completely excluded from the subject of real estate tax. Compared to the current situation, ponds used for intensive and industrial fish farming will no longer be subject to the tax. Due to this change, the affected taxpayers will not be obliged to file a tax return.
New real estate tax rate for unusable land
Land of the type "other area" with the land use type barren land, waterlogged area, border, hillside or greenery will be included in the so-called "unusable other areas" group from 1 January 2024, i.e. the taxation period of 2024, and the tax rate of CZK 0.08 per m will be applied to them.2. The taxation on these plots is thus reduced compared to the current situation. The municipality will be able to completely exempt these plots and plots with the use of other areas from the tax by a generally binding decree. The taxpayer does not have to file a tax return because of this change.
Changes in the exemption of land from real estate tax
From 1 January 2024, the exemption from the real estate tax is newly extended to cases of land encumbered by a building right in favour of the municipality in whose territory it is located.
At the same time, the exemption of land forming a single functional unit with a taxable building or taxable unit that serves defined publicly beneficial legal persons or facilities is extended to other persons or facilities.
On the contrary, the exemption for land and buildings used for waste management, typically landfills, is abolished.
Refinement of the tax base determination for residential units
The floor area of the residential unit will be determined according to the data registered in the Land Registry as of 1 January 2024. If the floor area is not registered in the Land Registry, it will be based on the owner's declaration and in the absence of the owner's declaration on the actual condition.
Restrictions on the exemption of meal vouchers
At present, food vouchers are tax-exempt without a limit, unlike the employee's meal voucher lump sum, which means that these meal benefits can amount to hundreds of crowns per day (so-called managerial meal vouchers). The conditions for exempting employer contributions to employee meals will be unified as of 1 January 2024 so that meal vouchers on the employee's side will also be exempt from personal income tax up to the statutory limit. In connection with this, the meal allowance will also be adjusted so that it can be adequately used by persons working longer shifts.
Cancellation of benefits for employee flats and family houses
Currently, where an employer provides an employee with a benefit in kind, the amount by which the consideration paid to the employer is less than what the normal cost would have been without the employee benefit is treated as income to the employee. That is, the price under the law governing the valuation of property, or the price charged by the employer to others for such consideration, except as it applies to units that do not include non-residential space other than a garage, basement or storage room, apartments and single-family dwellings in which the employee has resided for a period of 2 years immediately preceding the purchase, in which case no income accrues to the employee by virtue of this exception and thus no taxation occurs. This exemption will be abolished as of 1 January 2024.
The exemption from taxation for employee housing units, apartments and single-family homes existed because of the gradual transfer of housing stock held by large employers from the pre-1989 era. A transitional provision will ensure that the repeal of the exemption will not affect employees who resided in the housing units, apartments and single-family homes before the Act took effect.
Possibility to keep accounting in functional currency
Companies that have most of their transactions in foreign currency will be able to keep their accounts in a functional currency (EUR, USD, GBP) from 1 January 2024.
Reduction of the exemption limit for gambling income
From 1 January 2024, the limit for the exemption of gambling income will be reduced from the current CZK 1 million. CZK to CZK 50,000. This limit will apply depending on whether the winnings are subject to withholding tax at a special tax rate (withholding tax) or whether the winnings are included in the partial tax base.
According to the effective legislation of the Income Tax Act, winnings from lotteries (e.g. Sportka) and raffles are exempt from personal income tax if the amount of the winnings does not exceed CZK 1,000,000. Thus, if the prize in Sportka is CZK 999,999, it is exempt from personal income tax. Winnings from lotteries and raffles, unless they are exempt from personal income tax, are a separate tax base for taxation at a special tax rate (withholding tax), which is required to be withheld and paid by the taxpayer, i.e. in this case the organiser of the lottery or raffle. The withholding tax on income in the form of lottery and raffle winnings is generally 15 %.
For other types of gambling (odds and totalizator games, technical games, live games, live and small-scale tournaments and other gambling) the tax regime is different. For these gambling games, which are a single type of income, winnings are exempt from personal income tax if the difference between the total of winnings falling within this type of income and the total of gambling deposits within this type of income for the tax year does not exceed CZK 1 000 000. If winnings from these other types of gambling are not exempt, they are included in the general tax base, with only the gambling stake being an expense.
The complete abolition of this exemption would no longer be productive, as it would impose a significant additional administrative burden, where each player would have to file a tax return and document not only his income but also his expenses (i.e. each gambling stake).
Gambling tax increase and gambling regulation legislation
In line with the principles of public health protection and the fight against addiction, the second rate of 23 % currently applied to live games (e.g. dice, cards, roulette), bingo, odds betting (betting on the outcome, live betting), totalizator games (horse racing), raffles and small-scale tournaments (poker) will be increased to 30 % from 1 January 2024. The basic rate of 35 % currently applied to lotteries and technical games will remain at the current level.
At the same time, broader changes are being made to the Gambling Act, which, in addition to making the legislation more effective (e.g. by regulating the blocking of illegal gambling), have the essential aim of further increasing the protection of gamblers. This concerns e.g. modification of the setting of self-limiting measures, simplification of registration in the register of persons excluded from gambling, etc.
New tax-advantaged products for financial security in old age
Long-term investment product will be an instrument extending the range of retirement savings options to include banking and investment-type products from 1 January 2024. This will not be a new financial product, but a scheme for investment or savings-type financial products already established in law. At the discretion of the saver, this could be a conservative bank deposit, a savings account or a more dynamic collective or individual investment. The assets held in a DIP may consist only of cash, restricted stocks and bonds, unit-linked certificates and derivatives used to hedge currency or interest rate risk. Only regulated financial institutions (banks, credit unions, securities dealers, investment companies, self managed investment funds) will be allowed to provide DIPs. As in the case of supplementary pensions and supplementary pension savings, the participant will only receive a tax advantage if he or she withdraws the savings after 10 years of saving and a minimum age of 60. Each DIP provider will have to notify the CNB, which will maintain a publicly accessible list of DIP providers, of the start or end of its provision. Furthermore, the range of shares and bonds held under the DIP will be limited to shares and bonds traded on a regulated market or multilateral trading facility. Exceptions to this restriction are government bonds, bonds issued by the central bank and so-called covered bonds (known in the Czech Republic as mortgage bonds).
Long-term care insurance will be a product where the insured event is the dependence of the client who has taken out the insurance or his/her close person on the assistance of another person due to a long-term adverse health condition corresponding to dependence level III or IV according to the Social Services Act. It may also be a claims-made insurance with an agreed benefit in the form of the provision of care for the policyholder throughout the period of his or her dependency corresponding to dependency level III or IV or reimbursement of the costs of such care.
The total limit for all four tax-supported old-age savings products will be CZK 48,000 per year per taxpayer (today the limit is CZK 24,000 for supplementary pension and supplementary pension savings and CZK 24,000 for life insurance) and CZK 50,000 per year for employer contributions (this amount is the same today, but it will now also be available for long-term investment products and long-term care insurance). The citizen will be able to choose whether to use the tax support for only one type of product or to spread his/her savings and the associated tax benefit over several products.
Introduction of the so-called Alternative Participation Fund
In Pillar III, the amendment also proposes the possibility for pension companies to create an alternative participation fund. This will be a new type of fund in supplementary pension savings as an alternative to the existing participatory funds with a dynamic investment strategy. Due to the limits set, the existing participating funds cannot invest in private equity funds and in real estate, start-ups or infrastructure. In the case of the alternative holding fund, the fee policy and investment strategy will be set more freely. This will allow for more dynamic investment, inter alia, in products with the potential for higher returns, in particular over a longer period of time, with a looser definition of the range of assets in which the AIF can invest and without the statutory investment limits that apply to other AIFs. These parameters may be regulated in the AIF rules.
Parallel participation in the transformed fund of the original supplementary pension insurance and in the participant fund of supplementary pension savings will be possible. Until now, many participants have been motivated to stay in the transformed funds by the guarantee of non-negative appreciation and/or the possibility of a retirement pension, which, on the contrary, do not apply in the participant funds. However, this guarantee also leads to highly conservative investments with very low appreciation, often below inflation. Clients with a contract concluded before 2013 will now have the option to leave their existing savings in a transformed fund that guarantees non-negative appreciation (the so-called black zero) and allows partial withdrawal of funds in the form of a retirement pension, but with lower appreciation, while directing new deposits to one of the participating funds with the potential for higher appreciation of savings. State aid will only ever be granted for deposits into one type of fund.
The minimum savings period, after which funds can be withdrawn without penalty (if other criteria are met), will be extended for new contracts from the current 5 to 10 years. The age 60 condition will remain.
Support is introduced for the use of employee shares in situations where the employer wants to motivate employees in other ways than wages. At present, when shares are granted on preferential terms, this benefit is treated as employment income, i.e. subject to both income tax and social and health insurance contributions at the time of the grant or purchase of the shares on preferential terms. The amendment does not reduce the levy obligation (i.e. it does not give a nominal additional benefit to the recipient of this benefit), but postpones it until a specified point in time, which is e.g. 1) the sale of the shares by the employee or 2) his leaving the company or 3) 10 years after the receipt of this benefit. It also takes into account the situation where, after a promising start (and the allocation of shares), the project fails and the value of the company is lost. In this case, the employment income from the employee stock will be reduced. Similarly, taxation will be shifted/reduced for options that are taxed today (however, the vast majority are not taxable today, taxation occurs only at the time of the grant of the securities). It does not change the fact that capital gains on share appreciation are taxed outside the employment regime and can be subject to the time test (exemption after 3 years from acquisition).
From 1 January 2024, the taxation of income from employment will be postponed. We have initiated, together with the Ministry of Labour and Social Affairs and the Ministry of Health, that the subsequent changes ensuring the deferral of obligations in the area of insurance laws (social and health insurance) will be adjusted in their next amendments.
In the context of so-called option plans, the proposed amendment does not change the current situation where only so-called transferable options are subject to taxation. Non-transferable options are therefore no longer taxed.
Reduction of state support for building savings for existing and new contracts
As of 1 January 2024, the state support for building savings will be reduced to a maximum of CZK 1,000 per year for new and existing contracts.
Building Savings Account was created in the 1990s at a time when the mortgage market was not yet functioning and it was one of the few available ways for people to save for housing. However, in recent years it has lost its original function. Moreover, people generally use the money they save for purposes other than their own housing. Loans from building savings will be granted in particular for measures to promote sustainable housing, the management of natural resources or the use of renewable resources (e.g. insulation, efficient collection and use of rainwater and wastewater, the purchase and installation of a charging station for an electric car).
Cancellation of stamps
As of 1 January 2024, stamps will be abolished as a means of payment, with a transitional period when the existing stamps can still be used. With the increase in electronic card payments and cashless transfers, the need for stamps has significantly decreased and a number of frauds have been reported in the past in connection with their use.
Reduction of VAT rates and tax reduction
From 1 January 2024, the number of VAT rates will be reduced to the basic 21 % and reduced 12 %. Selected goods and services will be moved from the reduced to the standard VAT rate. Books will be completely exempt from VAT.
In line with recommendations from NERV and a number of other economic experts, the VAT system will be simplified from 1 January 2024 by unifying the two reduced rates (15 % and 10 %) into one common rate of 12 %. The measure will lead to greater efficiency and transparency of the VAT system, reduce opportunities for tax optimisation and, last but not least, eliminate absurdities such as the application of three different VAT rates on beer in restaurants.
The harmonisation of reduced VAT rates of 12 % will simultaneously reduce VAT (and thus public revenue collection) on a number of currently sensitive goods and services such as food without most beverages, construction work, child car seats or funeral services. A special item is books (but also e.g. colouring books, music books, picture books), which will not be subject to VAT at all, as they will be exempted. Conversely, items with no demonstrable social or health importance, which were included in the reduced rate by the last government in response to facts that have now passed (the covid crisis, the EET obligation), will be moved to the standard VAT rate. Specifically, these are hairdressing and barbering services, draught beer, municipal waste treatment, shoe, leather goods and bicycle repairs, cleaning services and cut flowers.
There is also an increase in the tax rate from 15 % to 21 %, e.g. for services of authors and performers, collection and transportation of municipal waste, firewood in all forms, import of works of art, collectibles and antiques. Other items from either of the two reduced rates remain at the unified reduced rate of 12 %.
Occasional and special public transport of passengers, all drinking water supplied through the water supply system and some medical equipment and devices are moved from the basic to the reduced VAT rate. Newspapers will be taxed at the 12% VAT rate, as will magazines and other periodicals.
Increase in sickness insurance rates for employees
As of 1 January 2024, employee sickness insurance will be reintroduced at a reduced rate of 0.6 %. The reduction of the sickness insurance rate for employees in 2009 was an unsystematic step, which was criticised by the social partners at the time and led to an imbalance in the sickness insurance system. The sickness insurance rate paid by employers was reduced from 2.3 % of the assessment base to 2.1 % in 2019 to compensate for the abolition of the withdrawal period. Thanks to this move and the introduction of other sickness insurance benefits (e.g. the introduction and then extension of paternity leave or the introduction of parental leave), the sickness insurance account has shown a negative balance since 2019, roughly - CZK 8 billion last year. The introduction of this measure is expected to balance the account.
According to the CZSO, the average gross wage in 2022 is CZK 40 353 per month, the impact on the net income of such an employee is CZK 242 per month (0.6 %).
| Sickness insurance rates (in %) | until 2008 | 2009 - 30. 6. 2019 | from 1 July 2019 | from 1 January 2024 |
|---|---|---|---|---|
| Employer | 3,3 | 2,3 | 2,1 | 2,1 |
| Employee | 1,1 | 0 | 0 | 0,6 |
Increase in tax on tobacco products and heated tobacco and introduction of tax on alternative products
In line with the principles of protecting public health, combating addiction and the recommendations from NERV, the gradual increase in excise duty on tobacco and heated tobacco products will continue beyond 2023, when the set three-year schedule of rate increases ends.
From 1 February 2024, the excise duty rates on cigarettes, smoking tobacco, cigars and cigarillos will increase by +10 %. In the period 2025-2027, excise duty rates on these products will further increase at a rate of +5 % per year. In the same period 2024-2027, the tax rate on heated tobacco will increase periodically by +15 %. A new excise duty will be introduced from 1 April 2024 on e-cigarettes, with a rate of 2.5 CZK/ml in 2024, rising to 10 CZK/ml by 2027, and on nicotine sachets, with a rate of 0.4 CZK/g in 2024, rising to 1.7 CZK/g by 2027.
The faster rise in rates for heated tobacco follows developments in neighbouring countries and the experts' recommendation to tax heated tobacco more closely to cigarettes. Currently, the tax burden on the refill of heated tobacco is about 22 % of tax per cigarette, and in 2027 this ratio is expected to be 29 %. The mechanism for the new excise duty on nicotine sachets and e-cigarette refills is based on a working version of the amendment to the European Tobacco Directive, which will introduce taxation of these products and harmonise rules across the EU. The taxation of hookah tobacco is proposed to be adjusted so that a substantial part of purchases for consumption in the Czech Republic are not made abroad (purely because of the high tax).
With regard to the taxation of traditional tobacco products in neighbouring countries, namely cigarettes, the highest minimum excise duty rate is in Germany (€177/1 000 pieces), followed by Austria (€158), the Czech Republic (€144), Slovakia (€132) and lastly Poland (€107). Poland is applying a multi-year plan to increase the rates on all tobacco products by 10 % per year between 2023 and 2026. All neighbouring countries except Austria have agreed to moderate increases in the last year.
Increase in the tax on alcohol
The rate of excise duty on alcohol will increase over a three-year period, with increases of 10 % in 2024 and 2025 and 5 % in 2026.
In line with the principles of protecting public health, combating addiction and the recommendations from NERV, a three-year schedule of increases in alcohol excise duty rates will be set from 1 January 2024. The three-year schedule of rate increases will provide a transparent plan and will not be affected by the election cycle as it overlaps the current term of this government. Under a permanent exemption negotiated in the EU, the half-rate will continue to apply to products from grower distillation for the grower's own consumption.
Compared to neighbouring countries, the Czech Republic currently has a lower taxation of alcohol than Poland and Slovakia,
and is thus on a par with Germany.
From the second month after the month of publication of the new Motor Third Party Liability Insurance Act in the Collection of Laws (e.g. if the Act is published in the Collection of Laws in January, the changes will take effect from 1 March):
Extension of compulsory liability insurance to minivans
The new law on third party liability insurance extends the range of vehicles subject to liability insurance. This will include all vehicles with a maximum design speed of more than 25 km/h, or more than 14 km/h if their operating weight is more than 25 kg, as well as trailers. The law also stipulates that motor vehicles are those where the engine is the main source of movement. This will include, for example, electric scooters or Segways. The electric bicycle will not be a vehicle, even under the European directive which this law transposes, because the primary source of energy in this case is pedalling and not just the trailer motor. An exception will also be made for garden tractors, for example, which are used exclusively on private land not accessible to the public. The moment they go off it onto the road, they become a vehicle and must be insured.
The definition of vehicle operation is redefined to mean any use of a vehicle corresponding to its normal function as a means of transport, regardless of the characteristics of the vehicle and regardless of the terrain in which the vehicle is used and whether it is stationary or in motion. The proposal also extends the exemptions from the obligation to take out liability insurance, including alternative liability insurance for motor racing or competitions.
The obligation to ensure that the vehicle is insured is now transferred from the owner of the vehicle to its actual operator. The obligation to ensure that the vehicle is insured will always apply to the operator and not to the driver who, for example, temporarily borrows the vehicle. This will also apply in the case of short-term use of shared scooters.
The end of the paper green card
With a six-month postponement of the effective date, green cards for proving liability insurance when operating a vehicle in the territory of the Czech Republic will be abolished and will be replaced by online insurance registration. However, a green card may still be required for travel abroad. Registration operations for changes to the road vehicle register will also be simplified. The minimum limits of insurance benefits will also be increased from the current 35 million. CZK to CZK 50 million. CZK.
There is no extension of the range of vehicles with compulsory number plates. Vehicles that will now be subject to the insurance obligation will not be registered in the road vehicle register, which will require a different approach to the control and enforcement of the liability insurance obligation, using different identification data such as the vehicle serial number. Electric scooters also do not have a speedometer as standard, so the technical parameters set by the vehicle manufacturer (design speed, weight) will be used to determine the obligation to have third party liability insurance.
Changes with effect from 1 March 2024:
Increase in the price of the vignette and its regular valorisation
From 1 March 2024, the price of the vignette will increase by CZK 800 from CZK 1,500 to CZK 2,300 per year. A new regular indexation scheme will be introduced, which will reflect inflation in particular. The current price of the vignette has been in force since 2012 and its real value has fallen as a result of the evolution of the price level. As the rates for vignettes are set at a fixed amount and the value of the vignettes has been decreasing in real terms over time due to the increase in the price level, it is necessary to valorise the price of the vignettes on a regular basis. The increase in the price of the vignette will occur through cumulative valorisation, which will allow the price of the vignette to increase by a whole ten koruna each time.
Changes with effect from 1 July 2024:
Changes to the state contribution in the third pension pillar
As of 1 July 2024, new developments concerning Supplementary Pension Savings and Supplementary Pension Insurance will come into force, which are associated with a change in the amount of state contributions. The main aim is to motivate citizens to make higher monthly deposits which, together with the state contribution, will help participants to ensure a sufficient financial reserve for old age.
Thus, from 1 July 2024, the minimum participant contribution from which the state contribution is provided will increase, as will the maximum participant contribution for which the maximum state contribution is provided. Between CZK 500 and CZK 1,700, the state contribution will now always amount to 20 % of the participant's contribution.
The changes in the level of contributions are summarised in the table below:
| Participant's contribution | State allowance today | State contribution newly |
|---|---|---|
| 100 CZK | 0 Kč | 0 Kč |
| 200 CZK | 0 Kč | 0 Kč |
| 300 CZK | 90 Kč | 0 Kč |
| 400 CZK | 110 CZK | 0 Kč |
| 500 CZK | 130 CZK | 100 CZK |
| 600 CZK | 150 CZK | 120 CZK |
| 700 CZK | 170 CZK | 140 CZK |
| 800 CZK | 190 Kč | 160 CZK |
| 900 CZK | 210 CZK | 180 CZK |
| 1 000 CZK | 230 CZK | 200 CZK |
| 1 100 CZK | 230 CZK + taxes | 220 CZK |
| 1 200 CZK | 230 CZK + taxes | 240 CZK |
| 1 300 CZK | 230 CZK + taxes | 260 CZK |
| 1 400 CZK | 230 CZK + taxes | 280 CZK |
| 1 500 CZK | 230 CZK + taxes | 300 CZK |
| 1 600 CZK | 230 CZK + taxes | 320 CZK |
| 1 700 CZK and more | 230 CZK + taxes | 340 CZK + taxes |
A participant who wishes to adjust his or her contribution amount following changes in state contributions, should do so starting with the July deposit. The change needs to be communicated with the pension company, it's not enough to just start sending more money.
As of 1 July 2024, it also ends payment of the state contribution to participants who have been granted an old-age pension, even if the pension is currently unpaid. The purpose of Pillar III is long-term deferral of consumption and the creation of savings for retirement, which is motivated by state support. It loses its meaning and effectiveness when a participant of retirement age uses Pillar III as a de facto short-term savings product with state support. A participant who has not yet reached the savings period required to withdraw funds in the form of a lump sum or pension (minimum 5 years) or a withdrawal (minimum 2 years and repayment of state support) can reduce his monthly contribution to a minimum amount (CZK 100) and meet the required period with this minimum contribution.
Retirement pension recipients with taxable income will continue to benefit from the tax advantage of saving for old age. In the case of contributions in the third pension pillar, they will be able to deduct all of their contributions from the tax base, unlike participants who are not yet retired, and they can only benefit from the tax advantage for contributions exceeding the amount associated with the payment of the state contribution (currently, the tax advantage is associated with contributions above CZK 1,000 per month, but as of 1 July 2024 this limit will rise to CZK 1,700 per month).
Tax relief for work performance agreements
There are two new thresholds for participation in the insurance of an employee who works on the basis of a temporary employment contract (and thus the thresholds for payment of social security contributions):
- the first limit will be set for a single-employer FTE at 25 % of the average wage, and
- the second limit (higher) will be set for the occurrence of participation in the insurance in the case of simultaneous multiple FTEs with multiple employers, at the rate of 40 % of the average wage.
If the employee exceeds one or the other limit, the insurance premium will also be paid. In order to control the measure, a register of all FTAs and the income from these agreements will be introduced.
This is a solution to the current unfavourable situation where agreements for the performance of work instead of casual employment are the only and frequent source of income for some employees. As a result, the persons concerned are not insured for pensions, i.e. they are either not entitled to an old-age pension at all or only a very small one at the end of their working capacity, which is reflected in the drawdown of State social assistance benefits.
The reason for this situation is mainly the exception in the area of social and health insurance premiums, where no insurance premiums are paid on a DPP up to CZK 10,000 with one employer. However, it is now possible to be employed by several employers at the same time in this way, which leads to the accumulation of agreements and such an employee does not pay insurance contributions even on a relatively high monthly income.
Changes with effect from 1 September 2024:
Changing the rules for early repayment of mortgages
The amendment to the Consumer Credit Act clarifies the rules with effect from 1 September 2024 for early repayment of the mortgage during the period for which the interest rate is fixed. The aim of the amendment is to set balanced conditions that are fair for all consumers. The approved proposal therefore consistently distinguishes whether the consumer has a legitimate reason for repaying the mortgage (if he or she is in a difficult life situation) or is motivated only by financial optimisation (switching to another bank at a lower interest rate).
The proposal clearly sets out what compensation the bank can claim for early repayment of the mortgage during the fixation period. In such a case, the bank is entitled to a limited compensation for administrative costs and part of the lost interest (interest differential). This difference is the sum of the interest that the bank will lose on early repayment of the contract up to the end of the fixing period, less the interest that the bank would have earned on a new similar loan. This is similar to the arrangement applied by a number of other EU Member States (e.g. Germany, Spain, the Netherlands, Sweden, Finland, Denmark, Ireland). The amendment escalates the amount of the compensation limit according to the number of years remaining until the end of the fixation period (maximum 0.25 % of the prepayment amount for each year remaining until the end of the fixation period) and at the same time reduces the total compensation limit to a maximum of 1 % of the prepayment amount.
However, the consumer still has the right to early repayment free of charge in difficult life situations. The consumer has already today the possibility of a fee-free early repayment of the mortgage in the following cases:
- as part of an insurance benefit designed to secure repayment of the loan,
- after the interest rate fixation expires,
- within 3 months of the bank communicating the new interest rate,
- in case of death, long-term illness or disability of the client or his/her spouse.
The new option of early repayment without a fee will also apply in the following cases:
- division of the matrimonial property (i.e. divorce of the client),
- selling the property 2 years (or later) after you buy it.
The consumer will still retain the right to free early repayment of up to a quarter of the original mortgage amount each year on the anniversary of the contract.
The new rules will apply to new credit agreements (i.e. agreements concluded after 1 September 2024), while for those in progress they will apply only to early repayments that occur during the fixation period concluded after the date of entry into force of this part of the amendment (i.e. after 1 September 2024).
The amendment to the Consumer Credit Act also includes additions and clarifications to the existing regulation on the assessment of the creditworthiness of a credit applicant. It is now made clear that automated models can also be used by a bank or non-bank credit provider to verify information on a consumer's expenditure. Furthermore, the scope of the data on which the provider is to assess the consumer's creditworthiness is clarified.
Changes effective January 1, 2025 with implementation in municipal regulations in 2024:
Comprehensive regulation of the determination of local coefficients for the real estate tax
The municipalities are now allowed to set the local coefficient by a generally binding ordinance for the entire municipality, for a city district / urban district, for a cadastral area or for an individual group of immovable property (e.g. all garages or all buildings used for business). If duly justified, it will now also be possible to set the local coefficient for individual immovable property by means of a general measure.
The range of local coefficients will now be 0.5-5. For agricultural land for which it has not yet been possible to introduce a local coefficient and for unusable other areas, a local coefficient of 0.5-1.5 may be introduced.
These changes will be reflected in the introduction and changes to the local coefficients effective from 1 January 2025, which must be introduced by a generally binding decree by 1 October 2024, and in the case of a measure of a general nature by 30 June 2024.
At the same time, municipalities will be given the opportunity to correct the erroneously issued general binding ordinance by 17 December of the previous year.
The effective dates of the changes to retirement savings and mortgage prepayments are based on the assumption that a bill to amend laws relating to the development of the financial market, will be promulgated in the Collection of Laws by the end of 2023.
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