Based on amendments of the income tax act passed last year and in the year before last, a number of changes are occurring for the taxable period of the year 2017 and 2018. Below, we present the second part of an overview of the most significant changes in the taxation of income of natural persons.

Withholding tax on small-scope income

Similarly to income ensuing from contracts of services, the total sum of which did not exceed CZK 10,000 for one taxpayer per calendar month, starting from the taxable period of the year 2018 it will be possible to also apply the retention tax on other income from employment, which will not exceed the sum of CZK 2,500 for one payer per month. Income taxed by applying withholding tax then does not need to be stated in the tax return. The duty to submit a tax declaration and therefore does not arise for the employee, but he may use for example the option of asking his employer to make a pay roll settlement. The sum of CZK 2,500 has mainly been set following the threshold income, which Czech insurance laws work with. Income from employment reaching up to CZK 2,500 is usually not subject to social insurance premium and in case of income from agreements to perform work or in case of members of cooperatives they are not subject to public health insurance premium either. It is necessary to mention that this exemption from health insurance may not relate for example to income received on the basis of a standard contract of employment or to remuneration for members of statutory bodies, where, on the contrary, it is necessary to pay health insurance from up to the minimum base of assessment, depending on the specific conditions for the given employee.

Additional pension insurance and life insurance

Starting from the taxable period of the year 2017, the limit for exemption of contributions from the employer to additional pension insurance and life insurance has been raised from CZK 30,000 to CZK 50,000 per year. At the same time, the maximum sum, which the taxpayer can subtract from the tax base on grounds of contributions he has paid to these types of insurance, has also been raised, from CZK 12,000 to CZK 24,000. In case of additional pension insurance, contributions already paid in the given year are not reduced by CZK 12,000, but newly it will be possible to subtract a total of these monthly contributions, which exceeded the sum, from which the maximum state contribution pertains to them, in the calendar month.

Donation of blood and blood-forming cells

Gratuitous blood taking can be subtracted from the tax base, among other things. From the taxable period of the year 2017, its value is newly valuated with the sum of CZK 3,000 (instead of the original CZK 2,000). In the year 2017 it will be possible for the first time to also subtract the value of gratuitous taking of blood-forming cells (with the exception of payment of proven travel costs related to the taking). For tax purposes, such taking is valuated with the sum of CZK 20,000. 

Employee benefits

An amendment of the act brings a specification of tax exemption of non-monetary transactions consisting in the form of using medical facilities. Non-monetary transactions in the form of using medical facilities are newly regulated as procurement of goods or services of medical, treatment, hygienic, and similar nature and procurement of medical means on prescription. Exemption should thus relate not only to the payment for rehabilitation or purchase of medicaments with supplementary payment or vitamin preparations, but also for example to procurement of dioptric glasses or health footwear on prescription, regardless of whether or not they are bought in a medical facility.

Since 2018, employers can also provide contributions to printed books to their employees more advantageously, including picture books for children. Such a contribution should be provided in a non-monetary way and promotion must not exceed 50 % of the area in such a book.

Request for return of overpayment

If the taxpayer newly submits the tax declaration along with a request for return of overpayment before the end of the deadline for submitting the tax declaration, the request will be viewed as if submitted on the last day of the deadline for submitting the tax declaration. In case the taxpayer submitted a request under the current regulation along with the tax declaration in January already, it was not possible to grant such a request and return the overpayment under the conditions set by the code of tax procedure. The taxpayer then had to submit a new request, in order to meet the time conditions stipulated by the Code of Tax Procedures.

We are available for consultation in case you are interested in the above discussed issue.