For 2025, the Ministry of Finance has prepared a number of changes that will positively affect the everyday life of citizens and companies in the Czech Republic. Among the innovations are, for example, the possibility for employees to draw higher tax-free health benefits, simplification of the car purchase allowance for people with health disadvantages, protection of investors and owners of cryptocurrencies or tax exemption on the sale of cryptocurrencies, securities and business shares.
Changes with effect from 1 January 2025:
Increase in the allowance for the purchase of a motor vehicle for persons with disabilities instead of VAT refund
As of 1 January 2025, the VAT refund on the purchase of a motor vehicle for persons with disabilities will be abolished and will be replaced by an increase in the motor vehicle purchase allowance by 85 thousand CZK. This is the average amount that has been paid in VAT. This will eliminate the double-track nature of the support for people with disabilities, who will receive the full amount for the purchase of a motor vehicle directly from the Labour Office and will no longer have to apply for a VAT refund to the tax office. The abolition of the VAT refund also fulfils a point of the Government's programme statement in the chapter Healthy Finances.
Reduction of VAT rate on pulse oximeters and blood pressure monitors
From 1 January, a reduced VAT rate of 12 % will be applied to pulse oximeters and blood pressure monitors. The change is due to the clarification of the customs nomenclature code for medical devices following the measures of the recovery package, which is effective from 2024.
Increase in the limit for employee health benefits
The income tax exemption limit for employee health benefits (e.g. rehabilitation allowances in a health care facility) will increase from 1 January 2025. This limit will now correspond to the average wage determined according to the law regulating social security contributions for a given year, which means that employees will be able to draw higher benefits without a tax burden.
Accumulation of savings period when changing the provider of a tax-supported long-term investment product (LTIP)
From 1 January 2025, the conditions under which savings periods will be aggregated for the purposes of assessing whether tax support should be clawed back when a change of DIP provider occurs will change. If a client transfers all of the savings from a tax-supported DIP with one provider to another provider, the savings period from the terminated DIP will count towards the 120 calendar month period requirement of the newly created DIP within which the taxpayer cannot withdraw funds from the DIP. If he did so, he would have to repay the tax support.
Adjustment of employee shares
From 1 January 2025, the current regime for employee shares (i.e. tax deferral) will only apply on a voluntary basis. It will be possible to elect to tax the benefit from employee shares immediately (as before 2023) or under the conditions listed in section 6(14) of the Income Tax Act.
Changes to withholding tax on work performance agreements (WPAs)
From 1 January 2025, an employee's monthly income from a FTE will not be subject to social security and health insurance contributions unless it reaches the amount that is eligible for sickness insurance for one employer. The same limit will also apply to the possibility of taxing income from a FTE by means of withholding tax, subject to other conditions set out in the Income Tax Act. If an employee earns less than this limit on a DPP, health and social insurance will not be deducted from his/her income and the income can simply be taxed by withholding tax at the special tax rate.
Specific price labelling of packaged food and non-food products
From 1 January 2025, all packaged food and non-food products will be labelled with a specific price in addition to the selling price*, giving the consumer an easy and reliable price comparison. Unpackaged products that are weighed or measured in the presence of the shopper, either in a self-service or in a manned sale, shall be marked only with the specific price. A specific list of packaged non-food items will be published in the decree of the Ministry of Finance.
* A unit price is a price related to a specific unit of measure (e.g. kilogram, litre, metre, piece) and is used to facilitate price comparisons between different products or services that may be packaged or offered in different quantities.
Changes to the FKSP
As of next year, the condition for drawing on the FCSP, whereby at least half of the basic allocation to the fund is mandatorily earmarked to support employee old-age security products that are exempt from personal income tax, will be abolished. The entire basic allocation can thus be used for any cultural or social needs. The amount of the basic allocation remains unchanged and remains at 1 % of the amount of costs charged to salaries/wages, their compensation and on-call remuneration. (The proposed change to the FCSP is currently still pending before the Senate - see Amendment by the Budget Committee to ST 700, it is therefore possible that the changes will not be effective from 1 January 2025).
Extension of tax relief for donations to Ukraine until 2027
Until 2027, the increased deduction for donations in support of Ukraine up to 30 % of the income tax base continues to be maintained. At the same time, financial donations to organizers of fundraisers for public benefit purposes, e.g. donations in connection with the September floods, are still legally deductible from the tax base if the statutory conditions are met, also up to a maximum of 30 % of the tax base. ST 727. The MoF expects its adoption to be valid for the 2024 tax period)
Protecting investors in cryptoassets and setting rules for trading them
Trading in cryptoassets will be subject to extensive regulation based on the European MiCA regulation from 30 December 2024. The main effects of the regulation will be visible in 2025 and will be fully applied from mid-2026. Only entities supervised by the Czech National Bank will be able to provide services related to cryptoassets or offer cryptoassets to the public. This will lead to an improvement in the quality of services provided, but above all to greater investor protection. The rules for the provision of services related to cryptoassets will thus become closer to traditional investment services. There will be conditions for a time and value test for exemption from personal income tax. The time test will ensure that if cryptocurrencies are held for more than three years, their sale will not be taxed. The value test, in turn, will ensure that transactions of up to CZK 100,000 per year will not need to be reported on tax returns, similar to securities. ST 692 a ST 694)
Tax increases on tobacco products, heated tobacco and alternative products in line with public health principles
In line with the principles of public health protection, the fight against addiction and the recommendations of NERV, the gradual increase in excise duty on tobacco products, heated tobacco products and so-called tobacco-related products continues.
From 1 January 2025, excise duty rates on cigarettes, smoking tobacco, cigars and cigarillos will increase by 5 %. Excise duty rates on these products will increase at the same rate in 2026 and 2027. Excise duty rates on heated tobacco will also increase at a rate of 15 % per year between 2025 and 2027. The faster increase in the rates for heated tobacco follows developments in neighbouring countries and the experts' recommendation to bring the taxation of heated tobacco closer to cigarettes.
The increase in excise duty rates will also be applied to newly taxed alternative tobacco products. The excise duty rate on e-cigarette refills will be 5 CZK/ml in 2025, and 0.8 CZK/g for nicotine sachets. The increase in rates must be taken into account in the following two years. In the case of refills for electronic cigarettes, the excise duty rate will reach CZK 10/ml in 2027, while for nicotine sachets it will be CZK 1.7/g. The taxation of new alternative products follows a Europe-wide trend to apply excise duty to all commodities that operate not only on the basis of tobacco but also nicotine and possibly other substances. However, the level of taxation set for these innovative products is significantly lower than for traditional tobacco products, mainly due to their declared lower level of harm to human health.
As regards 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 and the Czech Republic (€173), Slovakia (€148) and lastly Poland (€123). All neighbouring countries are gradually increasing their excise duty rates. In the case of Poland, an increase in excise duty rates of 10 % is agreed for both 2025 and 2026.
Increase in alcohol tax in line with public health principles
Following the recovery package, the excise duty rate on alcohol continues to increase. It will increase by 10 % in 2025 and then by 5 % in 2026.
In line with the principles of protecting public health, combating addictions and the recommendations from NERV, a three-year schedule of increases in alcohol excise duty rates has been set from 1 January 2024. This timetable provides a transparent plan and will not be affected by the election cycle by its overlap with the current term of this government. Based on 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.
For comparison, the excise duty on alcohol in 2024 is CZK 71 per half litre of 40% spirit, while in 2025 this rate will increase to CZK 78.2, i.e. by CZK 7.2.
Abolition of excise duty registration and simplification of permit procedures
Due to redundancy, the excise registration procedure will be abolished from 2025 and only the permit procedure will be left, from which the tax administrator will automatically obtain most of the data currently obtained, e.g. data on debt-free status. This will significantly reduce the administrative burden on entities associated with issuing and amending permits.
Reduction of the form of tax security from a financial guarantee to a bank guarantee
From 2025, one of the forms of tax security, i.e. financial guarantee, will be reduced to a bank guarantee. The change is made to prevent tax evasion and possible abuse of the financial guarantee. Taxpayers may use a 12-month transitional period to change the form of security (after the change, excise duty may be secured by cash, bank guarantee or third party guarantee).
Refund of excise duty on green diesel
From 2025, farmers can apply for a refund of part of the excise duty on green diesel, i.e. diesel demonstrably used for crop or livestock production, twice a year instead of the current single application. The change applies to those operators who claim a refund of more than CZK 50 000 per year.
Reduced excise duty rate for small independent breweries
Small breweries that are economically and legally interdependent can, from 2025, under several conditions (production limit, production independence), legally qualify for a reduced rate of excise duty on beer and are regarded as small independent breweries. The production volumes of small independent breweries that are legally or economically linked or produce beer under licence in a reciprocal relationship will be aggregated, in which case a reduced rate of excise duty on beer based on the sum of their annual production will be applicable.
Adjustment of the tax period for small electricity taxpayers
Electricity taxpayers who have a tax base of less than 350 MWh per year (which corresponds to a tax amount of approximately CZK 10,000 per year) will have their tax period extended from a calendar month to a calendar half-year in 2025. The taxpayer concerned will file two tax returns per year instead of the current twelve, which will significantly reduce his administrative burden.
New condition for trading in securities and shares in a business corporation
As of 1 January 2025, a limit for tax exemption is introduced for income from the sale of securities and shares in the aggregate amount of CZK 40 million. CZK 40 per year. This limit applies to income for which the so-called time test has been met, namely 3 years in the case of securities and 5 years in the case of business shares. If the sale of the security/trading share takes place in 2024 but the cash is not paid to the beneficiary until 2025, this income falls within the newly introduced limit of 40 million CZK. CZK.
Change in the subject and basis of the real estate tax on forest land
From 1 January 2025, the entire forest land on which a protective forest or a special purpose forest is located will not be excluded from the subject of the tax, but only the part on which these forests are located.
As of 1 January 2025, the alternative method of determining the tax base based on price regulations will be abolished, leaving only the current calculation in the form of the product of the actual area of the land in m2 (determined as of 1 January of the tax period) and the amount of CZK 3.80.
Changes in the exemption of land from real estate tax
Land with landscape features (e.g. trees, wetlands or ditches) remains exempt from property tax if it is recorded in the register of ecologically significant features, the so-called LPIS. From 1 January 2025, the exemption is extended to other landscape features such as landscape orchards, terraces, solitary trees or rockeries, i.e. from 1 January 2025, all ecologically significant features registered in the LPIS are exempt from the tax. At the same time, the exemption for "other areas" outside the built-up area, on which landscape features and other selected formations not registered in the LPIS are located, is abolished, with the vast majority of land on which these natural formations are located being taxed at a significantly lower rate (CZK 0.08 per m²). Municipalities may further reduce this tax by up to half by setting a local coefficient or exempt these plots entirely by a generally binding decree.
Forest land intended for electricity and gas distribution also remains exempt, while from 2025 it is more precisely defined as economic forests to the extent necessary for such distribution.
Changes in local coefficients of municipalities
From 1 January 2025, municipalities will have greater power to adjust the local coefficient according to their needs and local specificities. The municipality's ability to reduce the coefficient based on population to be applied to building lots, residential buildings and other taxable units is eliminated. Newly, municipalities may set the local coefficient as low as 0.5, thereby maintaining the tax reduction for these properties.
At the same time, the coefficient of 1.5 for recreational buildings, garages and immovable property used for business is abolished. As a substitute, municipalities may now set a local coefficient for specific groups of immovable property, for example for recreational buildings or garages. The changes will be made automatically by the tax administrator, so taxpayers do not need to file a new tax return for 2025.
In the case of coefficients based on the number of inhabitants from 1 January 2025, the number of inhabitants of the municipality according to the last census will not be decisive, but will be based on the data specified in the Decree on the implementation of the Act on the budgetary determination of taxes, as in force on the first day of the tax period.
Comprehensive regulation of the determination of local coefficients for the real estate tax
Until now, municipalities could only set the local coefficient by a generally binding decree. As of 1 January 2025, the rules under which municipalities may set the local coefficient by a generally binding ordinance for spatially or generically defined immovable property (e.g. for urban districts, cadastral areas, all garages or all buildings used for business) and now also by a general measure of a general nature for individual immovable property will be specified.
In order for these changes to take effect in the 2025 tax year, they had to be implemented by a binding decree in force by 1 October 2024, or 30 June 2024 in the case of a measure of a general nature.
Cross-border regime for small businesses
In accordance with the EU regulation, from 2025, small enterprises with their registered office in another EU Member State, which do not exceed a domestic turnover of CZK 2 million in a calendar year, will have to pay a tax on their turnover. CZK and an EU turnover of EUR 100,000 can benefit from the exemption under the so-called small business scheme as domestic non-taxpayers. This means that they do not become taxpayers in the Czech Republic. The same will also apply to Czech small businesses (regardless of whether they are taxable in the Czech Republic or not) that wish to take advantage of this exemption in other EU Member States.
There is also a change in the calculation of turnover of companies. Currently, turnover is calculated over a period of 12 consecutive calendar months. Now it will be calculated on a calendar year basis, which is also related to the new setting of the establishment of the taxpayer. Small businesses that exceed a turnover of 2 million CZK during the year will be subject to the new tax regime. They will become VAT payers only from 1 January of the following calendar year. However, if the turnover exceeds CZK 2,536,500 by the end of the year, they will become VAT payers the very next day.
Increase in the turnover threshold for the use of the quarterly tax period
From 1 January 2025, VAT payers are allowed to file a tax return for the tax period of a calendar quarter if the amount of turnover for the previous calendar year did not exceed CZK 15 million. CZK (currently it is only CZK 10 million).
Adjustment of the time limit for correcting the tax base
In addition to other changes within the framework of tax base correction, from 1 January 2025, the time limit for correcting the tax base will be adjusted to 7 calendar years following the year in which the obligation to declare tax on the original transaction arose. Currently, this period was only three years; the change is being made because in many cases the period for making a claim may be longer than three years.
Changes with effect from 1 July 2025:
Change of VAT rate in the construction sector
From 1 July 2025, the standard rate of VAT will apply to construction or installation work on completed housing or social housing buildings, unless the buildings no longer meet the conditions for these types of buildings after conversion. The aim is to ensure that conversion does not have a more favourable tax treatment than new construction if the resulting building does not qualify for the reduced VAT rate.
The definition of a residential building for social housing has also been changed - the reduced VAT rate will now apply if more than half of the floor area of the residential building is used as living space for social housing. This will extend the possibility of applying the reduced tax rate to the construction of residential buildings.
Changes to VAT exemption for the supply of immovable property
As of 1 July 2025, the taxation system will be simplified or exempted for the sale of immovable property. Only the first sale of immovable property after completion or after substantial alteration will be taxed. Subsequent sales will no longer be exempt without any deduction. The possibility to tax the sale of immovable property remains.
The fleet way of arranging insurance
From 1 July 2025, the Insurance Distribution and Reinsurance Act will also apply in full to so-called fleet insurance. In this type of insurance, the customer does not conclude/sign his/her own insurance contract with the insurance company, but joins an existing insurance as an additional insured person. This model of insurance is mainly used by leasing companies for car insurance, consumer credit providers for credit insurance, travel agencies for trip cancellation insurance, banks for credit card insurance or sellers of goods for extended warranty insurance.
Fleet insurance customers will now have the same rights and protection as when taking out their own insurance policy, for example they will receive a certificate of insurance. Businesses offering this type of insurance will have to obtain authorisation from the Czech National Bank as insurance intermediaries.
Reduction of branches of the Customs Administration of the Czech Republic and change of competence
In the context of the recovery package, the number of customs offices will be reduced from the current 15 to 6 from 1 July 2025. This will create a comparably burdened customs office.
At the same time, the competence of the Customs Administration of the Czech Republic will change. Its core competences will be: customs, tax administration (especially excise and energy taxes), split administration (administration of payment and recovery of monetary transactions on behalf of other authorities) and supervision in the field of gambling. Supporting areas for the exercise of core competences will be the areas of investigation (police role) and surveillance activities primarily in relation to goods.
MFA/ gnews.cz - RoZ
PHOTO - By ŠJů, Wikimedia Commons, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=17388936
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