On 27 July 2021, Act no. 586/1992 Coll., on Income Taxes, as amended (hereinafter the “Income Tax Act”), was changed, bringing new regulation of tax credit for children in article 35c and article 35d of the Income Tax Act.

The first change is the increase of tax credit for a second child from the amount of CZK 19,404 per year to the amount of CZK 22,320 (CZK 1,860 per month). In case of a third child and further children, the increase is from the original amount of CZK 24,204 per year to the amount of CZK 27,840 (CZK 2,320 per month). The basic tax credit per one child is not changing and remains at the amount of CZK 15,204 per year (CZK 1,267 per month). For employees, who apply tax credit for children at their employer in the course of the year 2021, nothing will change and the amount of the discount per dependent children remains the same as before the amendment of the Income Tax Act. Based on the transitional provisions, the new amount of credit will apply in the annual clearance of prepayments for the year 2021 or within the income tax return of natural persons for the year 2021. This change will only affect the calculation of the monthly prepayment of income tax from employment from 1 January 2022. 

The second change in the Income Tax Act brings a cancellation of the maximum limit for payment of the monthly tax bonus per child in the amount of CZK 5,025 in article 35d in paragraph 4. According to the transitional provision, though, the cancellation of the limit cannot be used until calculating tax prepayment for the month of January 2022 for the taxable period of the year 2022. Nevertheless, since the maximum limit for payment of the annual tax credit per child was already cancelled in the amendment of the Income Tax Act effective from 1 January 2021, it will be possible to settle everything in the annual tax settlement or in the tax declaration for the taxable period of the year 2021.