The Income Tax Act has undergone significant changes as part of the amendments associated with the consolidation of public budgets, particularly in the area of benefits provided by employers to employees. To clarify some of the new procedures, the General Financial Directorate (hereinafter “GFD”) issued a methodological information at the end of 2023. In this article, we would like to provide you with an overview of the main methodological interpretations of the individual amended areas.

Performance to create working conditions

The amendment changes the wording of Section 6(7)(e) of Act No. 586/1992 Coll. (hereinafter “the ITA”) to better describe the scope of performance not considered income from employment and not subject to tax. Newly, it is necessary to distinguish between performance contributing to the creation of working conditions for the performance of employees’ work falling under Section 6(7)(e) of the ITA and performance, in which the nature of a benefit related to the employee’s personal sphere prevails, assessed in the regime of Section 6(9)(d) of the ITA as employee’s income exempt from income tax under certain conditions (health, cultural, educational, recreational benefits).

Benefits for the creation of working conditions excluded from being subject to the tax can be provided from the following areas and under the following conditions:

• Meals
• Work breakfasts, lunches, dinners, which are viewed as the performance of work for the employer (meetings with business partners).
• Food available at the workplace (snacks, food stuff, nibbles), provided that it does not reach the intensity of a main meal and is provided at a reasonable
• Refreshments that are not main meals and are provided in the context of work meetings, seminars, workshops, etc.

A meal that constitutes the full form of a main meal will be assessed under the conditions laid down for the provision of a contribution to meals under Section 6(9)(b) of the ITA. The regime of providing non-alcoholic beverages remains unchanged after the amendment and the provision of such beverages at the workplace is exempt income for the employee under the conditions set out in Section 6(9)(c) of the ITA (non-cash, non-tax-deductible costs).

• Sports equipment at the workplace
• Sports equipment should be used to provide relaxation, stress relief to improve the employee’s work performance (exercise bike, rowing machine, wall bars, dumbbells).
• Exercise tools and equipment should be freely available at the workplace during the employee’s working hours or in temporal connection with the performance of work.
• Equipment should be available to a reasonable

Conversely, benefits provided by an employer that are comparable to an ordinary commercial service do not fall into this category.

Meals provided by the employer

The amendment introduces a single concept of “contribution to meals”, which includes the following forms:

• Provision of meals at the employer’s own catering facility
• Provision of meals through other entities (including the provision of meal vouchers or electronic meal vouchers)
• Provision of a cash contribution for meals

In the case of provision of several forms of contribution to meals within one shift, the value of all forms provided is exempt for the employee after meeting the conditions in Section 6(9)(b) of the ITA.

Non-monetary benefits provided in the field of health, culture, recreation, education

• The material scope of non-monetary benefits remains unchanged.
• A new annual exemption limit of CZK 21,983.50 has been introduced for 2024.
• This limit is applied to the aggregate value of all benefits provided by the employer to the employee during the tax year.
• It will be assessed for each employer separately.
• This limit includes benefits for the employee’s family members.

The amount above the limit will be treated as taxable income of the employee.

Events organised by the employer

• This is a non-monetary benefit for the employee consisting in participation of the employee or his/her family member in a sporting or cultural event organised by the employer (Christmas parties, company anniversary celebrations, children’s days).
• These events are exempt from the income tax for employees under the following conditions:
  • they are organised for a limited number of participants (employees, family members, business partners)
  • the organiser is the employer
  • it is not a recreation or a tour
  • given the nature of the event, it is customary for an employer to organise such an event
  • the form and scope of the event are reasonable
  • the criteria for assessing reasonability and customariness may be the location, in which the event is held, and the frequency, with which events are held

Valuation of employees’ non-monetary income

Depending on the conditions set out in the guidance, the valuation of non-cash income may be made:

• in accordance with the Act on the Valuation of Property
• in the amount of the difference between the amount paid by the employee to the employer and the price charged by the employer to other persons
• in the amount of the price charged by the employer to other persons
• in the manner specified in GFD Instruction D-10 (use of comparable uncontrolled price or Cost+ method)
• to the extent of the costs incurred by the employer in the case of acquisition of the benefit from third parties for consideration

Timing of non-cash income in relation to benefit cards

The methodology of the GFD gives a general interpretation of the generation of non-cash income, which must be examined individually according to the conditions of the specific situation. The timing of non-cash income in the case of benefit cards is defined, for example

• by the moment the money is credited or
• under specific conditions, the moment points are credited to the benefit card
• per month according to the amount of the lump sum payment
• at the time of the actual use of points.

After the amendment, the benefits provided by the employer are more advantageous due to the tax deductibility of most of the costs incurred for these benefits. We are fully at your disposal for further analysis of your situation.