Payroll Newsletter - Summer 2022

Non-monetary benefits of the employer which the employee pays himself/herself are tax exempt

The Income Taxes Act determines that non-monetary benefits provided to an employee in the form of use of:

• medical institutions, 
• educational facilities,
• recreational facilities, 
• contributions to cultural or sporting events. 

are tax exempt on the part of the employee.

The employer provides these benefits to the employee when other conditions under the Income Tax Act are met.

The Supreme Administrative Court confirmed that in order to meet the conditions of exempt employee income, non-monetary benefits from the employer in favour of the employee may also have a form where the employee pays for the goods or services himself/herself and the employer provides him/her with earmarked funds, either in advance or against already demonstrably incurred expenses.

For the exemption from personal income tax, it is important that these funds are used for the purpose as if they were spent by the employer, not whether the goods or services were paid directly by the employer to the supplier.

Obligation to inform the Labour Office about employees granted temporary protection

According to the Employment Act, employers who employ a foreigner who has been granted temporary protection (e.g. a citizen of Ukraine) must inform the Labour Office of the Czech Republic of this fact. Employers are obliged to report even if the employee enters into an agreement to complete a job or an agreement to perform work.

This obligation of employers applies to all employees from abroad, regardless of their nationality, residence status or the obligation to obtain one of the work permits.

The Labour Office of the Czech Republic has repeatedly appealed to this obligation of employers, stating that for failure to inform about a foreign employee under temporary protection, the employer is threatened with a fine of up to CZK 100,000 imposed by the State Labour Inspection Office, as there are cases where companies fail to comply with this obligation.

Increase in the average price of fuel

Following the increase in fuel prices, the Decree on the determination of the average price of fuel for the purpose of reimbursement of travel costs was amended. 

The average price of petrol was increased to CZK 44.50 and the average price of diesel to CZK 47.10. The Decree came into effect on 14 May 2022.

Increase in travel allowance rates for electric vehicles

With effect from 12 March 2022, the average price per 1 kWh of electricity for electric vehicles increased from CZK 4.10 to CZK 6.00. 

An employee may claim the reimbursement of electricity at the prices at which he/she actually purchased it if he/she attaches to the business trip invoice a proof of purchase from which the connection with the business trip is apparent.

Decree prices are used when there is no payment document available or when an employee charges an electric car at home.

Change in the content of the Notice of Commencement of Employment form

From 1 April 2022, when notifying of the termination of an employee, the employer is also obliged to report the reason for the termination of employment and the average amount of the employee's net income to the Czech Social Security Administration (CSSA). In connection with this, the form "Notice of commencement of employment (termination of employment)" has been modified. The reason for the modification of the form is the new collection of data through the CSSA information system for the provision of unemployment benefits to the Labour Office of the Czech Republic on the basis of an amendment to the Employment Act. The new form is used in cases where the commencement or termination of employment occurred on 1 April 2022 or later on.

Taxpayer declaration form in Ukrainian

In connection with the employment of Ukrainian citizens who come to the Czech Republic due to the conflict in their country, the Financial Administration has prepared a template form of the "Declaration of the taxpayer liable to personal income tax from employment" in Ukrainian. Please note, however, that this is only a "read-only" template, as the declaration can only be made in the Czech language.

Increase in the limit of the non-taxable portion of the tax base also for 2022

The Act on Measures in the Field of Taxation in Connection with the Current Conflict on the Territory of Ukraine brings a continuation of the existing regulation in the area of the non-taxable portion of the tax base. For the entire 2022 tax period, the possibility of deducting the value of gratuitous supplies in the aggregate amount of no more than 30% from the tax base remains. 

Such gratuitous supply provided in 2022 may also be considered a supply for the purpose of supporting the defence efforts of Ukraine and to Ukraine, its territorial administrative units or legal or natural persons with their registered office or residence in the territory of Ukraine, provided that the recipient of the gratuitous supply and its purpose meet the conditions for deducting the value from the tax base.

Tax exemption – accommodation of Ukrainian employees

The new income tax exemption is again brought by the Act on Measures in the Field of Taxation in Connection with the Current Conflict in the Territory of Ukraine. The employee's income is exempt from tax, according to the Income Tax Act, in the form of accommodation provided in the 2022 tax period. This non-monetary benefit without limit must be provided by the employer to the employee and to a member of his/her family residing in the territory of Ukraine on the ground that that family member has left Ukraine in connection with the conflict on its territory.

Change in the amount of tax assessed by the employer on behalf of the employee for a low-emission motor vehicle provided free of charge

The new law, which will be promulgated in the Collection of Laws during June 2022, changes the amount of tax paid by the employer on behalf of the employee for low-emission motor vehicles from 1 percent to 0.5 percent of the input cost of the vehicle. The law applies retroactively from the beginning of 2022. It will therefore be possible, from the adoption of this law, to tax 0.5 percent of the input price of a low-emission motor vehicle per month and to correct the amount applied in the annual tax settlement even for months where 1 percent of the input price of the vehicle was taxed. The concept of a low-emission motor vehicle will be laid down in the Act on the Promotion of Low-Emission Vehicles through Public Procurement and Public Passenger Transport Services. The bill, which is yet to be discussed, states that a low-emission vehicle is a road vehicle of category M1, M2 or N1 that does not exceed the CO2 emission limit of 50 g/km and 80 % of the emission limits for real-world air pollutants. 

Conclusion of an employment contract in electronic form

In one of its most recent decisions (21 Cdo 2061/2021), the Supreme Court dealt with the question of whether a settlement agreement between an employer and an employee could be established by e-mail, i.e. electronically, in a situation where the specific conditions for service laid down by the Labour Code had not been complied with. In this case, it was an agreement regulating the termination of employment by agreement and the payment of severance pay to the employee. The Supreme Court concluded that the special regulation of the service of documents under the Labour Code is not of fundamental importance for assessing the origination of this agreement. Since a signed draft agreement was sent as part of an e-mail from the employer and the employee confirmed the receipt of this draft agreement by e-mail, the Supreme Court concluded that in this case the agreement is valid when it was concluded in accordance with the requirements of the Civil Code for the conclusion of contracts and the emergence of legal acts.