Despite the fact that the tax administration is still working on the preparation of a methodological instruction on the taxation of employee benefits following the approved consolidation package, it has now been forced to respond to a misconception spread by the public regarding the taxation of the company nursery school benefit.

For orientation within the framework of this issue, we would like to remind you that before the approval of the recovery package, the benefit provided in the form of company nursery schools for employees was exempt from personal income tax. However, with effect from 1 January 2024, this benefit falls within the aggregate limit for tax exemption under Section 6(9)(d) of the Income Tax Act (between CZK 21,000 and CZK 22,000 per year per employee).

The Ministry of Finance of the Czech Republic (MFČR) has now published a statement on its website outlining the methodology for taxing corporate pre-school facilities next year:

• if the employee pays at least the same amount for the company pre-school as for the state pre-school (approx. CZK one to two thousand per month without meals), this is not taxable income for the employee, as he/she pays the costs himself/herself;
• if the company pre-school is provided free of charge to the children of employees, the full cost common at state pre-school facilities will be treated as an employee benefit. However, if in aggregate with other benefits subject to the limit of half of the average wage (health, culture, sports, etc.) the employee does not exceed this limit, the company nursery benefit will be tax-free. Otherwise, the benefit will need to be added to the employee’s salary.

It is therefore positive news that the valuation of corporate preschool services by the Finance Ministry relates to the cost of public pre-schools rather than private pre-schools, where monthly fees for placing a child in a pre-school facility tend to be many times higher.

The Ministry of Finance concludes that the method of valuing the benefits of company nurseries will be the content of the methodology under preparation. Its publication is not yet in sight.

Another piece of very positive news is the proclamation of the Finance Ministry that should any problematic aspects appear during the application of the new methodological instruction, the Finance Ministry is ready to propose an appropriate legislative and technical change to the relevant passages in the Income Tax Act to adapt to practice.

We will continue to monitor the situation and keep you informed.