Payroll Newsletter - Autumn 2022

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.

Summer of Grace II.

After the so-called “Summer of Grace” proved successful last year, it will start again from 1 September 2022. A natural person with a monetary debt to a public entity (the state, a territorial self-government unit, or an enterprise in which the state or a territorial self-government unit has an equity interest) enforced by a bailiff may pay the principal amount enforced in the enforcement proceedings until 30 November 2022 and pay compensation for the costs of enforcement in the amount of CZK 1,500, or else CZK 1,815 incl. VAT, in case the bailiff is a VAT payer. Upon payment of the entire principal amount due and the compensation to the bailiff, the natural person shall be forgiven all related penalties and default interest that increased the original debt. The individual must not be in insolvency proceedings.

How to proceed in such a case? The natural person must inform the bailiff in writing that they wish to take advantage of the Summer of Grace initiative and, at the same time, ask the bailiff to disclose the amount of the outstanding principal of the debt. Once they receive this information from the bailiff, they shall pay the principal amount owed, together with the compensation, into the bailiff's account, with a clear indication that it relates to the Summer of Grace II initiative. Upon receipt of payment, the bailiff shall halt the enforcement proceeding.

The Summer of Grace applies only to those enforcement proceedings that were initiated before 28 October 2021. It cannot be applied to fines or other property penalties imposed for a deliberate criminal offence, maintenance claims and claims for compensation for personal injury or for wilful misconduct.

In addition to public entities, other private entities may also voluntarily participate in the Summer of Grace initiative.

Increase in Minimum Subsistence Level from 1 July 2022

Due to high inflation, the minimum subsistence level per individual has been increased from CZK 4,250 to CZK 4,620 as of 1 July 2022. At the same time, the level of non-distrainable money to be kept by debtors has also been increased to CZK 9,416.25.

Low Emission Vehicles - Accounting for Tax Corrections for the First Half of 2022

With effect from 1 July 2022, the amount of income for tax purposes, and therefore for social security and health insurance purposes, for employees who also use a low-emission company vehicle for private purposes, changes from 1% to 0.5% of the cost of the respective vehicle.

The tax corrections for the first half of the year cannot, thus, be carried out retrospectively in individual months, but will only be reflected after the end of the taxation period in the calculation of the annual advance payment and tax credit or in the tax return, where the employee will then benefit from an overpayment of tax.

According to the opinion of the Czech Social Security Administration (ČSSZ) and the General Health Insurance Company (VZP), there will be no retroactive adjustment of premiums in the contribution basis for the first half of 2022. The reduced value of this benefit will be included in the contribution base only from the date this law enters into force, i.e. from 1 July 2022.

Identification of Low-Emission Vehicles

In connection with employee low emission vehicles and the new rules for the taxation thereof, the General Financial Directorate has issued information on the “identification” of a low emission vehicle. Compliance with the CO2 emission limit requirement could be assessed in particular on the basis of the Certificate of Conformity (CoC), which should contain necessary information on the vehicle’s compliance with the required low emission limits. The CO2 value can be assessed from the vehicle’s large technical certificate. By the end of 2025, these limits shall be fulfilled by battery electric vehicles, fuel cell vehicles (i.e. hydrogen vehicles), and plug-in hybrids, as well as electric vehicles with extended range, provided they meet these parameters.

Discount on Social Insurance Premiums

With effect from 1 February 2023, it will be possible for selected groups of employees to benefit from a 5% discount on social insurance for the company provided certain conditions are met. This will reduce the premium from the previous 24.8% to 19.8%.

The selected groups are full-time employees who:

  1. are over 55 years of age;
  2. are caring for children under 10 years of age;
  3. are caring for a close relative under 10 years of age who is dependent on the assistance of another person, Grade I-V;
  4. are studying;
  5. had started retraining as a jobseeker in the 12 calendar months preceding the calendar month for which the discount applies;
  6. are disabled persons;
  7. are under 21 years of age.

Under (a) to (f), the employee must also work only part-time, for a minimum of 8 hours and a maximum of 30 hours per week

The employer will check for the employees concerned on a monthly basis when calculating their wages that:

  • the aggregate of the employee's assessment bases does not exceed 1.5 times the average wage;
  • the aggregate of the assessment bases per hour does not exceed 1.5% of the average wage;
  • the hours worked in a month do not exceed 138 hours;
  • the conditions are met for the entire duration of the employment in the calendar month;- the employee to whom the premium reduction is applied is not also in receipt of a part-time allowance.

If the employee has more than one employment where they meet said conditions, the discount will be claimed by the employer where the employee has duly submitted all relevant documents and where the employer applied for the discount first.

The employer is subsequently obliged to archive the documents entitling the employer to the discount for 10 years.

Change in Average Petrol Prices and Travel Allowances

On the basis of Decree No. 237/2022 Coll., modifying the rate of basic compensation for the use of road motor vehicles and meal allowances and determining the average price of fuel for the purpose of providing travel allowances, the average price of 98 octane petrol was extraordinarily updated with effect from 20 August 2022. The amount was increased from CZK 40,50 to CZK 51,40 per litre of fuel.

New Amount of Travel Allowances

Decree No. 237/2022, effective from 20 August, also changes the rates for domestic meal allowances for the business sector:

  • CZK 120 if the business trip lasts between 5 and 12 hours;
  • CZK 181 if the business trip lasts longer than 12 hours, but no longer than 18 hours;
  • CZK 284 if the business trip lasts longer than 18 hours;

Increase in Value of Meal Voucher Lump Sum

The limit for exemption from income tax on employment income for the cash allowance for meals (meal voucher lump sum) has been newly increased. 

The maximum amount that is not subject to taxation or insurance contributions is now set at CZK 99.40 per shift. 

However, as the Decree comes into force on 20 August, there are two different thresholds for the meal allowance in the same month. The higher tax-free allowance can thus be used for the last 11 days of August.

The following applies:

  • for the period 1-19 August, the original value of CZK 82.60;
  • for the period 20-31 August, the new value is CZK 99.40.

One-off Child Allowance from Tax Perspective

On the basis of Act No. 196/2022 Coll., on the one-off child allowance, the Labour Offices of the Czech Republic have started to pay a one-off child allowance of CZK 5,000 to claimants under the conditions set out in the Act.

The one-off child allowance is provided by the state to the child as financial assistance with maintenance and other personal costs and is paid from the state budget. In terms of the Income Tax Act, it is tax-exempt income.

It is an allowance belonging to the child and will therefore not count towards the CZK 68,000 limit on the spouse's own income.

Allowance to Support Employment of People with Disabilities

The Czech government has approved a package of support for the disabled, one of which is an increase in the allowance for employing persons with disabilities. Currently, the maximum amount of the allowance for employers is CZK 14,500 per month for each such person employed. This will increase by CZK 600 per month with effect from 1 July.

Adjustment of Compensation for Loss of Earnings following Unfitness for Work

With effect from 1 September 2022, the average earnings relevant for calculating compensation for loss of earnings following unfitness for work caused by an occupational accident or disease will increase by 5.2%. This applies to compensation accrued before 1 September 2022. The adjustment also applies to compensation accrued between 1 September and 31 December 2022.

SAC Decision on Late Payment of Overtime

Many employers tend to pay employees for overtime work for which compensatory time off is granted in lieu of premium pay only once the compensatory time off has been used up. The compliance of this practice with the Labour Code has been disputed due to the failure to comply with the statutory time limit for payment of wages, according to which wages are payable after the performance of work no later than in the calendar month following the performance of work. Where compensatory time off was not taken in the same month in which the overtime occurred, the employer was in breach of that provision when the due date was not observed. The risk was the imposition of a fine by the Labour Inspectorate as well as the immediate termination of the employment by the employee. However, in its recent decision (6 Ads 138/2022), the Supreme Administrative Court stated that nothing prevented such a practice if agreed upon with the employee. In the present case, it is necessary to negotiate with the employee a temporary postponement of the payment of overtime wages. This can be done together with an agreement to take compensatory time off in lieu of overtime pay, which is expressly required by the Labour Code. The Labour Code does not provide for this agreement to be in writing. However, it may be recommended for a more effective weight of evidence.

Upcoming HR Measures

On 31 August 2022, the government adopted the so-called Anti-Bureaucratic Package I. This requires members of the government to implement measures that affect, among other things, the labour-law area. Thus, the following should take place by the end of 2022:

  • abolition of the obligation to provide occupational health examinations for selected professions;
  • removing the administrative burden on employers in the form of a mandatory written leave schedule;
  • abolition of the reporting of the termination of sick leave for a person who is no longer an employee.