With the adoption of the consolidation package, many changes have been made, both in the area of personal and corporate income taxation and social security and health insurance contributions. At the moment, a proposal for new legislation in the Social Security and Health Insurance Acts is subject to the external comment procedure, which mainly focuses on changes to work performance agreements and unification of the time of taxation and payment of insurance premiums for income from employee shares/options.

Changes to work performance agreements

We would like remind you that the original wording of the new legislation effective from 1 July 2024, which we informed you about in the article here, is repealed and a new procedure is introduced for “people working based on work performance agreements” in the so-called notified agreement scheme. This scheme allows an employee to choose the “main” agreement with one of his or her employers, on which no insurance premiums will be paid, as long as the income in a given month does not exceed the limit of 25% of the average wage (for 2024 this amount is CZK 10,500).

The payment of insurance premiums for other unreported agreements will be treated either as small-scale employment, where the income is less than CZK 4,000 per month and no insurance premiums are paid, or as standard employment with insurance participation. 

Employee stock and option plans

In the absence of amendments to social security and health insurance legislation, the employer would be obliged to pay social security and health insurance contributions on behalf of its employees at the time the option is exercised, while the advance tax would be withheld and paid only at the time of deferred taxation (e.g. when the employee sells the share).

As mentioned in the introduction, the proposed amendment also postpones the payment of social security and health insurance premiums with effect from 1 July 2024.

Comments of the Chamber of Tax Advisors of the Czech Republic

One of the proposals is to implement a transitional provision in both Acts, which provides that the procedure under the proposed changes with deferral of premium payments could be voluntarily applied retroactively from 1 January 2024. 

Furthermore, the Chamber of Tax Advisors of the Czech Republic comments that due to the lack of interconnection of the laws in question on the postponement of the moment of taxation and payment of the insurance premium, the transitional provision should contain a warning about the situation where the payer has already paid the insurance premium on the income in question in the period from 1 January 2024 until the proposed amendment comes into force, but the moment of taxation has been postponed. In such a situation, the income in question is not subject to social security and health insurance contributions again at the time of deferred taxation, as the insurance would be paid twice.