The Chamber of Tax Consultants contacted the General Health Insurance Company (hereinafter “VZP”) and the Czech Social Security Administration (hereinafter “CSSA”) with a request to provide methodological guidance on how insurance premium payers should correctly proceed with the correction of health and social insurance for the period from January to June 2022 following the amendment to article 6 paragraph 6 of Act No. 586/1992 Coll., on Income Taxes, which took effect on 1 July 2022. 

This amendment reduces the amount of an employee’s non-cash income, if he or she is provided a low-emission motor vehicle free of charge by the employer for business and private purposes for the entire taxable period of 2022. According to the transitional provision, the reduced percentage of 0.5% of the entry price of the low-emission motor vehicle will apply for the entire taxable period of 2022. 

With regard to the above, the Chamber of Tax Consultants has contacted VZP and CSSA with a request to communicate the methodological procedure in these institutions. 

Communication from the VZP

Application of the premium payment procedure at the VZP considers the calendar month, not the calendar year, as the relevant period, therefore the health insurance premiums paid for the period January to June 2022 are considered correct and no retrospective adjustments should be made for the above period. As a result, with this procedure, the total annual assessment base for health insurance premiums and the total annual taxable income of the employee for 2022 will differ. 

Communication from the CSSA

The transitional provision of the amended law regulates only the issue of taxation of income that has been accounted for by the employer until January-June 2022. CSSA notes that the newly set amount of 0.5% of the entry price for the low-emission vehicle provided to the employee has not been determined for individual months, but will only be reflected in the annual settlement of advance tax payments. The income of the employee for the calendar month accounted for by the employer is included in the assessment base for social security contributions. The enactment of the amendment has not resulted in any change adjusting the determination of income accounted for and its amount for the calendar months of January through June 2022 (prior to the effective date of the amendment). 

An amount equal to 1% of the entry price will enter the employee’s and employer’s assessment base for that period, regardless of whether any employee may have been provided with a low-emission motor vehicle between January and June 2022. Therefore, if for this period the employer included the said premium in the amount of 1% of the entry price of the motor vehicle in the assessment base, it was in compliance with the legislation and the adoption of the legislation does not have an impact that would require a retroactive solution on the part of the CSSA. 

Author: Roman Burnus, Marek Toráč