At the beginning of March, the government approved the bill on Uniform Monthly Employer Reporting (UMER), which is intended to significantly simplify the obligations of employers. The Ministry of Labour and Social Affairs plans to introduce the new system from 2026, with the key change being the merging of the current 25 different reports into one summary document. Employers will thus not have to send the same data repeatedly to different institutions such as the Social Security Agency, Labour Offices, the Ministry of Labour and Social Affairs, the Czech Statistical Office or the tax administration.

In addition to the main law, the government has also submitted a set of accompanying legislative changes, including an amendment to the Income Tax Act, which brings several significant changes in the area of taxation of employees and statutory bodies of companies.

Tax changes: End of withholding tax for certain income

Changes for non-residents of the Czech Republic

One of the key changes is the abolition of withholding tax on remuneration of members of corporate bodies if received by individuals – tax non-residents. Until now, this income has been taxed in a different way than for Czech tax residents, which the government believes has created unfair tax differences. From 2026, the withholding tax will only apply to legal entities who act as a member of a body, thus unifying the conditions for individuals.

Complete abolition of withholding tax on dependent activities

Another major change is coming from the year 2027, when withholding tax on income from employment is to be abolished completely. This concerns mainly:

• Income from agreements to complete a job without a signed “Taxpayer’s Declaration”, if it does not reach the limit for participation in sickness insurance.
• Small-scale employment, e.g. agreements to perform work or remuneration for the performance of an office, provided that the monthly amount does not exceed the threshold for participation in sickness insurance.

New rules for filing tax returns

Employees who do not ask their employer for an annual settlement of their advances will now newly have to file their own tax return. For non-residents of the Czech Republic with income from remuneration of members of corporate bodies, this obligation will apply only to those whose annual income exceeds 36 times the average wage.

Automatic completion of tax returns in the future

In the second phase of introducing the UMER, the state plans a new digital service that would allow employees to automatically pre-fill their tax returns based on the data that employers submit under the UMER. This step is intended to further reduce the administrative burden and minimise errors in filing returns.

Further legislative process

The UMER Bill was officially submitted to the Chamber of Deputies on 11 March 2025 and is now awaiting debate. If it passes the approval procedure, companies will see a significant simplification of administration from 2026, while employees and members of the statutory bodies of companies will have to reckon with the adjustment of tax obligations.