Employers often reward their former employees for their loyalty after retirement with a meal allowance in their company canteens. However, the consolidation package forgot to exempt these contributions for pensioners, dealing an unexpected blow to the popular non-cash benefit. The new wording of Act No. 586/1992 Coll., on Income Taxes (hereinafter “ITA”), effective from 1 January 2024, has conditioned the exemption of the meal allowance on the performance of work for at least 3 hours on a given calendar day. Lunches have thus gone from a nice benefit to an administrative burden for employers and taxable income for employees, including social security and health insurance contributions.

However, the omission of the consolidation package has received the expected amendment. On 19 June 2024, Act No. 163/2024 Coll. was published in the Collection of Laws, which adds an additional letter to the provisions of Section 6(9). Non-monetary benefits provided to former employees who worked for the employer at the time of retirement or disability pension due to third degree disability will not be subject to tax or insurance contributions from 1 July 2024, up to the statutory limit (CZK 116.20 per calendar day).

However, the related transitional provision specifies that the exemption can also be applied retroactively for the past six months, i.e. the period from 1 January to 1 July 2024. If the employer has charged tax on meals in the form of non-monetary benefits (i.e. meals intended for direct consumption) provided by the employer in its own catering facility or in a facility operated by another entity, the tax withheld must be corrected, or the employer may take the difference into account in the annual settlement of tax advances and tax benefits, if performing it.

In connection with the obligation to pay statutory levies, it is important to note that income from benefits provided to recipients of an old-age pension or an invalidity pension for third-degree disability is included in the assessment base of these employees for a period of one year from the date of termination of employment. For employees whose employment has not already been terminated for one year, overpayments of insurance contributions can be refunded. In order to ensure the refund of overpayments, the Ministry of Health of the Czech Republic requires an adjustment of the premium payment, including a correction of the premium payment reports, and the Czech Social Security Administration offers employers the opportunity to submit a refund request or accepts a corrected premium payment report.

If, because of the original wording of the law, the employer took over the tax and insurance premiums at its own expense and “grossed up” the employee’s income, the overpayment incurred after the correction is made is not refunded to the employee.