Changes from 1 January 2025 in payroll accounting

Change in the progressive tax rate

For the application of the rate, the key factor is 36 times the average wage, which for 2025 is CZK 1,676,052. Employees’ income exceeding CZK 139,671 per month (CZK 7,770 more than in the previous year) will be taxed at a progressive tax rate of 23% in 2025.

Maximum assessment base

The limit for the maximum assessment base is set at 48 times the average wage, which means that the amount for 2025 is CZK 2,234,736 (CZK 124,320 more than in the previous year). No social security contributions are payable on income above this threshold.  

Minimum wage

The minimum wage has been increased by CZK 1,900 compared to the previous year to a total of CZK 20,800 per month. With a 40-hour week, the hourly minimum wage for 2025 is CZK 124.40.

Small-scale employment

The relevant income for small-scale employment is increased to CZK 4,500 (from CZK 4,000).

Agreements to perform work

The original bill, which envisaged a so-called notified agreement regime, is being repealed. However, the employer is still obliged to register with the Czech Social Security Administration all agreements to perform work (hereinafter referred to as “WPA”).

Income earned by an employee on the basis of a WPA will not be subject to social security and health insurance contributions from 1 January 2025, unless it reaches the decisive amount of 25% of the average wage in a calendar month (for 2025 this amount is CZK 11,500).

The same limit will also apply to the possibility of taxing income from the WPA by means of withholding tax, subject to other conditions set out in the Income Tax Act. If a WPA employee earns less than this limit, health and social insurance will not be deducted from his/her income and the income can simply be taxed by withholding tax.

Extension of the caregiver allowance provided

The amendment to the Sickness Insurance Act also allows employees working on the basis contracts for services, WPA or small-scale employment to receive caregiver allowance. This group is entitled to caregiver allowance on the condition that they pay voluntary sickness insurance. An insured person who has been paying sickness insurance for at least the 3 preceding calendar months immediately before the month, in which the need for treatment arises, will be entitled to the payment of caregiver allowance.

Change in insurance payment for working old-age pensioners

Retirement pensioners are entitled to a 6.5% “exemption” from pension insurance payments. It will only be necessary to pay 0.6% sickness insurance on the realised income. The pensioner is obliged to prove his/her entitlement to a discount on insurance premiums to his/her employer by submitting a decision on being awarded an old-age pension and an affidavit of entitlement to the full amount of the old-age pension.

Travel costs

The rates of domestic travel allowances for 2025 are set in Decree No.475/2024 Coll. and their final amount for this year is presented below.

Domestic meal allowance rates for 2025

• 5 to 12 hours – CZK 148 to 177
• 12 to 18 hours – CZK 225 to 271
• More than 18 hours – CZK 353 to 422

The maximum amount of the employer’s exempt contribution for employee meals is CZK 123.90 per shift as of 1 January 2025.

The rate of basic compensation for 1 km of driving for passenger cars is CZK 5.80 per km as of 1 January 2025.

Fuel prices according to the third sentence of Section 158(3) of the Labour Code for the year 2025 are:

• petrol 95 – CZK 35.80/l
• petrol 98 – CZK 40.50/l
• diesel fuel – CZK 34.70/l
• Electricity – CZK 7.70/kWh

International travel allowance rates for the year 2025

The list of foreign travel allowance rates for 2025 is announced under No 475/2024 Coll. The daily meal allowance abroad is:

• EUR 55 for Italy 
• EUR 50 for Poland
• EUR 50 for Hungary
• EUR 35 for Slovakia
• EUR 45 for Germany and Austria
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Changes to personal income tax from 1 January 2025

Separate limit for health benefits

The new limit does not replace the existing one under Section 6(9)(d) of the Income Tax Act (the “ITA”), but will be monitored separately alongside the limit for the exemption of leisure-time benefits. This means that the following two limits will need to be recorded for individual employees:

• A separate limit for employee health benefits (up to the amount of the average wage for the tax period – for 2025 this is CZK 46,557).
• The original limit for the exemption of leisure benefits (up to the limit of half of the average wage for the tax period – for 2025 this is CZK 23,279).

Limitation of exempt income from the sale of securities/ownership interests

The exemption from personal income tax is limited to EUR 40 million in aggregate from 1 January 2025 for all income from the sale of securities and ownership interests for the tax year (the limit cannot be applied separately to each individual income). This limit applies to income for which the so-called time test has been met, namely 3 years in the case of securities and 5 years in the case of ownership interests.

Income exceeding the limit of CZK 40 million will need to be apportioned into taxable and exempt income due to the limitations on the deductibility of expenses that you will be able to claim against taxable income.

Stock option plans

From 1 January 2025, the current regime for employee shares (i.e. tax deferral) will only apply on a voluntary basis. The employer may decide to voluntarily proceed according to the legislation effective from 1 January 2024, i.e. the employer will not account for the employee’s non-cash income until the calendar month, in which the employee acquired the share or stake, but will voluntarily defer the taxation of this income into the future to one of the statutorily enumerated moments pursuant to Section 6(14) of the ITA (e.g. the moment when the employee ceases to work for the employer).

The possibility of deferring taxation of such non-cash income from employment will be conditional on the employer’s obligation to notify the tax office of its intention to use the deferred tax moment by the 20th day of the calendar month following the month, in which the employee acquired the share.

Cryptoassets – value and time test for tax exemption

The setting of rules for trading cryptoassets is based on the European MiCA regulation. Thanks to the implementation into Czech legislation, it is possible to exempt income from the sale of crypto-assets from tax, which was not possible before.

The conditions for tax exemption will be similar to those for securities, i.e. the time test will guarantee that if cryptocurrencies are held for more than 3 years, their sale will not be taxed (the same CZK 40 million limit as for income from the sale of securities applies here). The value test will also allow transactions up to CZK 100,000 to be exempt from tax and thus not be reported in the tax return.

The bill is currently before the Senate of the Czech Republic.

Extension of tax relief for donations to Ukraine until 2027

Czech lawmakers confirm their clear intention to support Ukraine’s defence efforts by extending the increased deduction for donations in support of Ukraine up to 30% of the income tax base. At the same time, it still applies that financial donations to organisers of collections for public benefit purposes, e.g. donations in connection with the September floods, are legally deductible from the tax base if the statutory conditions are met, also up to a maximum of 30% of the tax base (the increased deduction of donations is also valid for the 2024 tax year).

Changes to tax deductions and allowances in the 2024 annual tax settlement/tax return

Deductions and allowances that are no longer deductible/payable in your annual tax return:

• a discount for placing your child in pre-school,
• student discount,
• deduction of payment for examinations verifying the results of further education,
• deduction of membership fees paid to the trade union.

The taxpayer can now deduct contributions to all tax-supported retirement savings products and tax-supported long-term care insurance up to CZK 48,000 per year. The total aggregate limit corresponds to the sum of the previous two limits of CZK 24,000 per year for supplementary pension insurance and supplementary pension savings and CZK 24,000 for life insurance.

Restrictions on the spouse discount

The conditions for claiming the spouse discount have also been tightened. The discount will only be applicable if the taxpayer’s child under the age of 3 is also dependent in the joint household. There is also a condition that the taxpayer’s husband must not have his own income exceeding CZK 68,000 for the tax year.