As we have already informed you in the past, as of 1 January 2024 there will be changes in the concept of taxation of employee benefits. Just before Christmas, the Financial Administration issued important methodological information on these changes, which is expected to set the record straight on various uncertainties and controversial areas brought into practice by the amendment to the Income Tax Act in connection with the consolidation package.

The information is quite extensive and covers a number of practical situations. The first part of the methodological information is dedicated to the tax treatment of income on the part of the employee, while the second part of the methodology focuses on the tax deductibility of the employer’s related costs. In the future, the tax administration expects that the methodological information will be supplemented by a set of progressively published questions and answers in response to partial problems when applying the changes in practice.

The first part of the methodology addresses the following areas in detail:

• benefits provided to employees in the form of food and beverages,
• sports equipment available at the workplace,
• other benefits for employees (leisure time benefits, events organized by the employer),
• valuation of employees’ non-monetary income,
• the moment when non-cash income arises in connection with the so-called benefit cards.

The second part deals with the tax deductibility of related costs from the employer’s perspective.

The last practical part of the methodology contains an overview of the most typical benefits and their taxation regime for both the employee and the employer applicable before and after the amendment of the Act. In view of the course of the legislative process, when a significant part of the government bill was replaced by a comprehensive amendment and the explanatory memorandum to the government bill is therefore largely irrelevant, for practical reasons and to increase the legal certainty of taxpayers, this methodological information is accompanied by both the text of the explanatory memorandum and the justification of the adopted amendments.

Last but not least, we would like to point out that the financial administration often appeals in the methodological information not to abuse the situation (law) and to refrain from alternative interpretations of the new legislation, which would be testing the limits of the amended wording of the law, especially in relation to the obligations for employees to create and comply with their working conditions.

We will continue to monitor further developments in this area for you and will be happy to assist you with any assessment of your particular situation.