Payroll Newsletter - Summer 2019
Tax changes, news, practical information
An overview of the news from the payroll environment in one place. This is our quarterly payroll newsletter. Scroll through the current release.
Cancelling the waiting period and changes concerning sickness insurance
The waiting period in relation to sickness benefits (in Czech: karenční doba) will be cancelled with effect from 1 July 2019. Employees will be entitled to a wage compensation in temporary incapacity for work (TIW) in an amount corresponding to 60% of the reduced average wage already from the first business day. TIW commencing before the effectiveness of this Act is governed by the existing legal regulations. However, the case when sickness originates on 30 June 2019 and the employee has completed the entire first shift will be treated differently: the period of the first 14 days will only commence on the subsequent calendar day, i.e. 1 July 2019.
Providing a wage compensation in the first three business days of TIW will increase the employers’ costs. As a consequence, the rate of employers’ contributions to the sickness insurance will decrease from 2.3% to 2.1% (this also involves self-employed persons). The total insurance rate for employers will decrease from 25% to 24.8%. Insurance contributions amounting to 24.8% of the employer’s assessment base will be deducted from July 2019.
Reporting duty concerning income flowing abroad
This notification (replacing the form “Notification of a payer concerning income tax paid in the form of deduction”) has to be filed on behalf of members of the statutory bodes of legal persons if these members are tax non-residents. Since 1 April 2019, this notification has to be filed using a new form of the Ministry of Finance, whereby the employer’s reporting duty newly covers reporting income exempt from tax and income not taxable in the Czech Republic under international treaties – both on condition that the income exceeds the amount of CZK 100,000 per month.
Notification must always be filed electronically (via a data box/ the EPO portal) by the end of a month following the one for which the income was accounted for (i.e. for the first time, the duty to file the new notification was until the end May for the April income).
Changing the limit of the relevant income with regard to determining an independent tax base for taxation in the form of withholding tax
On 1 May 2019, an amendment to the Income Taxes Act modified the relevant limit for determining an independent tax base for taxation in the form of withholding tax as defined in Section 6 (4) (b). If the taxpayer did not submit a taxpayer’s declaration to the payer, the employment income accounted for or paid by the payer subsequent to an increase under Section 12 will constitute an independent tax base for taxation in the form of withholding tax in the event that the aggregate income from the same payer for a calendar month does not exceed the amount relevant for the employee’s participation in the sickness insurance scheme. The withholding tax thus will no longer derive from the fixed limit of CZK 2,500 as nowadays but will newly be limited by an amount relevant for the employee’s participation in the sickness insurance, which is currently CZK 3,000. With regard to income generated based on an agreement to perform a job, the limit for this income to be subject to the withholding tax remains unchanged, i.e. an income of CZK 10,000 from the same payer per calendar month.
Change in the calculation of the the super gross wage since January 2019 – confirmed by the Coordination Committee
As we have already informed you in the previous Payroll Newsletter, the calculation of the super gross wage has changed since 1 January 2019 for employees participating in compulsory insurance in another EU member state, EEA country or in Switzerland. The super gross wage must newly include the compulsory foreign insurance contributions paid by the employer in the given state (this will include solely insurance paid by an employer which, by nature, corresponds to the Czech health, sickness and pension insurance and contributions to the state’s employment policy).
Even though this method of calculating the super gross wage may entail an increased administrative burden, the Coordination Committee confirmed in March 2019 that this course of action must be adhered to and that all other solutions are out of the question.
Execution/insolvency wage deductions – increasing the cap for deducting the fully seizable amount
With effect from 1 June 2019, a change was made in the amount in excess of which the remaining net wage after the deduction of unseizable amounts is deducted without limitation. This amount was CZK 9,643 so far (i.e. the sum of the minimum living wage of CZK 3,410 and normative housing expenses of CZK 6,233). Based on an amendment to the regulation on unseizable amounts, this cap has doubled to CZK 19,286 since 1 June 2019. The manner of calculating the amount of wage deduction based on execution-related regulations remains unchanged.
In calculating wages in practice, this change will be reflected as an increased cap for retaining the unseizable amount in the June 2019 payroll period for the first time. This change guarantees that employees will retain a greater portion of their wage and, simultaneously, seeks to increase the motivation of employees who are subject to wage deductions to achieve higher earnings.
Electronic sick certificate (“eNeschopenka”) – amendment to the Act on sickness insurance
Following an amendment to the Act on sickness insurance, the Czech Social Security Administration (“CSSA”) will launch a comprehensive mandatory system of electronic sick certificates (“eNeschopenka”) starting from 1 January 2020. The electronic processing will considerably simplify the information flow among sick persons, the CSSA, physicians and employers.
Physicians will no longer fill in a printed form consisting of five parts; instead, they will complete an electronic sick certificate using their medical software or a free web application at the CSSA’s ePortal. The patient’s/employee’s details, including the employer’s data, will be automatically filled in from registers, with the physician completing solely the information on the patient’s diagnosis and the date on which temporary incapacity for work (TIW) commenced. Nevertheless, the employee is still obliged to inform its employer of the origination of an obstacle to perform work in any manner and without any undue delay (a general duty stipulated by labour-law regulations). Subsequently, the continuation and termination of the TIW, or a change in the address of the patient’s stay or the time of the permitted leaving of home during the TIW, will be once again confirmed by the physician via the software or ePortal.
Employers will be entitled to require so-called proactive notifications concerning the TIW of their employees (it will be possible to file those requests electronically via the CSSA’s ePortal service that will be accessible after login via a data box or the NIA portal) and notifications will be sent immediately upon each login of the attending physician. Otherwise, the information will be sent to employers immediately after reports have been processed in the CSSA’s systems (after data verification). Employers will be able to authorise their employees or other persons, such as those processing wages, to use the CSSA’s ePortal.
If the TIW lasts more than 14 days, the employer will still have to send an electronic attachment to a request for sickness benefits including data necessary for calculating the amount of the benefit. This attachment will newly include the bank account number to which the employee’s wage is sent (unless the employee selects another manner of benefit payment). When such TIW is terminated (and the employee returns to work), the employer will send an electronic report about the employee’s performance of work (if any) on the last day of or during the TIW.
The payment of sickness benefits will be processed based on those electronic reports provided by the practitioner and the employer.