Payroll Newsletter - Winter 2016
Tax changes, news, practical information
The Maximum Assessment Base for the Payment of Social Security Insurance in 2016 and the Increase in the Threshold for the Payment of Solidarity Tax
In 2016, the maximum assessment base for the payment of social security insurance increases from CZK 1,277,328 to CZK 1,296,288. Accordingly, the threshold for the solidarity tax has been raised: in 2016, this will be paid if the gross income exceeds CZK 108,024 a month.
Relief for Child Placement (Nursery Fee)
The 2015 relief for child placement can be claimed from the employer as part of the annual settlement/reconciliation of advance payments or from the tax administrator as part of the tax return. The relief is related to facilities for pre-school age children including nursery schools pursuant to the School Act. Relief can be claimed on every dependent child in the maximum amount of CZK 9,200. Relief can be claimed based on the statement of the amount of the nursery fee paid (issued by the applicable facility frequented by the child) in the amount of the expenses (excluding nutrition) incurred on the placement of the dependent child in the relevant taxation period.
Travel Allowances during Business Travel
In 2016, modifications will come into force on travel allowances rates which are paid to employees upon business travel. If the employee uses a private motor vehicle for business travel, they are entitled to compensation for the wear-and-tear of the vehicle as well as for the consumed fuel. For 2016, compensation for the wear-and-tear of the vehicle increases by 10 hellers, with the employee entitled to CZK 3.80 per kilometre travelled. In contrast, fuel-related allowances have seen a marked decrease in the regulation-adjusted prices of fuel, which is a response to the 2015 drop in prices. If an employee claims compensation for consumed fuel in 2016 using regulation-adjusted prices, they may claim compensation in the amount of CZK 30.60 per 1 litre of consumed petrol or CZK 29.10 per 1 litre of consumed diesel. With respect to diesel, the regulation-adjusted price has decreased by CZK 7 per 1 litre. Instead of regulation-adjusted prices, the employee may, of course, claim compensation based on actual expenses determined using a receipt for the payment of fuel.
In 2016, domestic meal contribution rates have also seen an increase with respect to individual time zones of CZK 1-3 compared to 2015. Employees are newly entitled to meal contributions in the amount of CZK 70 if the business trip lasts 5-12 hours, CZK 106 if the business trip lasts between 12-18 hours, and CZK 166 if the business trip lasts for over 18 hours. The rules governing the reduction of meal contributions remain unchanged.
The amount of meal contributions for travel abroad has also been changed for selected countries for 2016. Meal contributions upon business travel to EU member states have not been modified.
New Reporting Duty Pertaining to Income Exempt from Tax
On 1 January 2015, an amendment to the Income Taxes Act entered into force that introduced, among others, the duty of personal income tax payers to report tax-exempt income in excess of CZK 5 million. Tax-exempt income includes, for example, income from the sale of real estate or a cooperative share, from the transfer of securities, a lottery win, tax-exempt gifts and inheritance. The amount of income is assessed on an individual basis. Taxpayers are obliged to report tax-exempt income in excess of CZK 5 million to the taxation authority by the deadline for filing personal income tax returns, at the latest, that is by 1 April 2016 unless the deadline for filing the tax return is extended. This obligation applies to all taxpayers who receive tax-exempt income in excess of CZK 5 million, which also includes those who are not obliged to file a tax return. If the taxpayer does not fulfil the duty to report, they may face a fine amounting to 15% of the entire tax-exempt income.
Damages for Pain and Suffering
On 26 October 2015, a regulation governing the damages for pain and suffering and loss of amenity due to an accident at work or an occupational disease was introduced and entered into effect. The value of 1 point newly amounts to CZK 250. If the pain or loss of amenity was caused prior to the effective date of the regulation and if a medical opinion was not issued prior to the effective date, damages for pain and suffering or damages for the loss of amenity will be determined pursuant to this regulation.
Change of Health Insurance Company as of 1 January 2016
As of 1 January 2016, employees were able to change health insurance companies. Please note that any such change must be reported to the employer (as well as the payroll processor) without undue delay.
New Public Holiday – Good Friday
Good Friday, which is observed as part of Easter, is, starting in 2016, a newly approved public holiday, which means it is also a day of rest.
End of the Second Pillar – Pension Saving Funds
As of January 2016, contributions to pension saving funds are no longer paid. The funds will be abolished as of 1 July 2016 and will be placed into liquidation, which is to be completed by the end of 2016 (with the pension funds thereby ceasing to exist). By the end of March 2016, pension companies will send a written announcement to participants about the commencement of the termination process. It will also include a call for the participant to state, by September 2016, whether they wish to have the funds disbursed in their entirety or transferred to a potential contract in the third pillar of supplementary pension insurance (‘penzijní připojištění’) or additional pension savings (‘doplňkové penzijní spoření’). Pension companies will also inform the participant of the possibility to pay the rest of the contributions to pension saving funds so that their pension assessment rate is not lower for the period over which they participated in the second pillar.
The participants that send a notice to the pension companies by September 2016 regarding the way in which they wish to have their funds treated will have these settled by the end of December 2016 (however, probably not earlier than October 2016). The remaining funds, the treatment of which is undetermined, will be, no later than by the end of January 2017, transferred to the account of the contribution administrator and subsequently to the participant’s personal tax account.
Deduction from the Health Insurance Base
As of 1 January 2016, the state’s payment for “state” policy holders will increase from CZK 6,259 to CZK 6,444. What changes is the amount that is, in certain conditions, deducted from the health insurance assessment base. The entitlement to the deduction applies only to those employees who meet the conditions stated in Section 7 (3) of Act No. 592/1992 Coll.: the entitlement to apply a deduction may be claimed by employers who employ over 50% of people with disabilities and may be applied only in relation to persons who have been awarded disability pension.
The deduction may be made even if the above stated facts have existed for less than a month.
Complying with the obligatory quota when employing people with disabilities
This obligation applies to all employers who, in an average recalculated headcount for a calendar year, employ over 25 employees.
The employer can fulfil this duty by one of the following means:
- Employing those citizens at an employment rate of 4%;
- Purchasing products, using services or assigning contracts to employers who employ over 50% of people with disabilities – for 2015, the payment for one recalculated employee amounts to CZK 181,321; and
- Payment into the state budget – for 2015, the payment for one recalculated employee amounts to CZK 64,758.
By 15 February 2016, the employer is obliged to announce the sort of supply in writing by filling in the appropriate form and, by the same date, when not complying with this duty, to pay the corresponding difference into the state budget.