On 26 September 2022, the Government of the Czech Republic issued Decree No. 290/2022 Coll., in which it set the new average wage for the year 2023 reaching CZK 40,324. The average wage affects the following levy obligations for individuals.

Progressive tax rate

The progressive personal income tax rate of 23% applies to the portion of the tax base that exceeds 48 times the average wage for the taxable period. In 2023, income exceeding CZK 1,935,552 will be taxed using the progressive tax rate. The monthly settlement is based on 4 times the average wage, so income exceeding CZK 161,296 will be subject to higher taxation in 2023.

Maximum assessment base

The calculation procedure for determining the maximum assessment base is the same as for calculating the limit for progressive taxation. For 2023, the annual limit for social security contributions is CZK 1,935,552. There is no obligation to pay additional social security contributions on the assessment base above this threshold.

Employee participation in sickness insurance

The obligation for employees to participate when performing small-scale employment sets a limit of CZK 4,000, calculated for 2023 as one tenth of the average wage rounded down to the nearest five hundred korunas. This means that it is not necessary to make a tax declaration for monthly wages up to and including CZK 3,999.

Minimum advance payments for self-employed persons

The new amount of minimum deposits for self-employed persons for 2023 is CZK 2,944 for pension insurance and CZK 2,722 for public health insurance.

Minimum wage

On 21 December 2022, the Government of the Czech Republic approved an increase in the minimum wage by CZK 1,100, so from 2023 the minimum wage will be CZK 17,300.

The setting of a new minimum wage in 2023 has affected certain areas of the Income Tax Act as follows:

• nursery school fees can be claimed for 2023 up to CZK 17,300 per child
• an increase in the minimum threshold income for entitlement to the child tax bonus to CZK 103,800
• an increase in the exemption of regularly paid pensions up to CZK 622,800, which corresponds to a monthly pension of CZK 51,900.

Author: Roman Burnus, Marek Toráč