Payroll Newsletter - Winter 2017/2018
Tax changes, news, practical information
Change in the Tax Credit Provided for the First Child
Due to the Amendment to the Income Taxes Act effective from 1 January 2018, the tax credit provided for the first child increases by CZK 150 to CZK 1,267 per month (CZK 15,204 per year). The tax credits for the second child (CZK 1,617 per month/ CZK 19,404 per year) and for the third and further children (CZK 2,017 per month/ CZK 24,204 per year) remain unchanged.
Maximum Assessment Basis for the Social Insurance Levy in 2018 and Increased Limits for the Solidarity Tax Payment
The maximum assessment basis for the social insurance levy in 2018 increases from CZK 1,355,136 to CZK 1,438,992. Thus, also the limit for the solidarity tax payment increases; in 2018, the solidarity tax payment will be paid from income exceeding CZK 119,916 per month.
Minimum Wage Increases with Effect from 1 January 2018
With effect from 1 January 2018, the minimum wage increases by CZK 1,200 to CZK 12,200, and the minimum hourly wage increases to CZK 73.20. Also, even minimum guaranteed wages for individual groups of works increase, now being in the range of CZK 12,200 to CZK 24,400 (eight groups according to the complexity, responsibility and laboriousness of the work to be done). The increase in the minimum wage affects eg the following: limits for the origination of the entitlement for a tax bonus (the annual income equates to at least a sextuple of the minimum wage/ monthly at least a half of the minimum wage); maximum income of a job-seeker in the register of the Employment Office (half of the minimum wage); amount of social benefits excluding benefits with regard to the applicant’s income; increase in the maximum tax benefit for placing a child in a pre-school facility (amounting to the minimum wage); increase of the limit for pensions exempt from the income tax (up to 36 times the minimum wage – ie CZK 439,200 for 2018).
New 2018 Minimum Assessment Basis for Health Insurance
In connection with the change in the minimum wage effective from January 2018, also the minimum assessment basis for health insurance changes. This also means a change in the minimum monthly health insurance payments that are mandatory for individuals with no taxable income and which are made eg for so-called state categories of insured persons (students, old age pensioners, women on maternity leave, parental allowance beneficiaries, job-seekers in the registers of employment offices etc).
The minimum monthly assessment basis for health insurance for 2018 amounts to CZK 12,200 and the monthly payments equal CZK 1,647.
New Limits and the Confirmation of Entitlement to Decrease the Tax Base arising from Pension Savings
For the purpose of decreasing the income tax base, the limits of paid supplementary pension insurance (pension savings) were increased to CZK 24,000 per year with effect from the 2017 taxation period. However, newly solely those payments are included that exceeded CZK 1,000 in the individual calendar months of the taxation period. Thus, pension insurance companies will have to adjust issued certificates in a way that will enable verifying the correctness of the amount by which the tax base is to be decreased.
Declaration of the Personal Income Tax Payer
Starting in the 2018 taxation period, communication between employers (tax remitter) and employees (taxpayers) in terms of the Income Taxes Act is extended, so that it will be possible to also use other ways of the employees’ discretion in applying non-taxable parts of the income tax base, deductions and tax benefits. Besides the existing physical form, employees may newly file and sign their tax declarations electronically. However, the employer has to ensure for an unequivocal identification of specific employees. This includes eg electronic signatures or an identification by means of the employer’s internal information system. The form of the declaration is to be decided by the employer, or both given forms may be combined.
In connection with the aforementioned Amendment, the Ministry of Finance also published new form templates designed solely for one taxation period and valid from 2018. These include the Declaration of the Income Tax Payer, form no. 25 5457 Mfin 5457, template no. 26, and an Application for the Annual Prepayment and Tax Benefit Reconciliation, form no. 25 5457/B Mfin 5457/B, template no. 1.
The up-to-now used Declaration of the Income Tax Payer form, template no. 25 (valid for three taxation periods) may continue to be used for employees who will file their tax declarations solely in paper form.
Printed Books as another Kind of Benefit
Starting on 1 January 2018, the list of tax-advantageous employee benefits also includes a contribution for printed books including picture books for children, in which advertisement does not exceed 50% of the surface. On the part of the employer, these are tax non-deductible expenses and the contribution may also be provided from the cultural and social funds.
Tax Reliefs for Income Tax Payers in Connection with Disability and Holders of a Disability Certificate (“ZTP/P”)
With effect from 1 January 2018, a taxpayer’s disability in terms of tax reliefs is newly reflected based on the date on which the taxpayer has been awarded disability pension or the status of a disabled person or on which these have been revoked, not on the factual receipt of pension or issuance of the disability certificate. Similarly, also the disability of a dependent spouse will be assessed.
Changes in the Amount and Drawing of Parental Allowance
With effect from 1 January 2018, the upper limit of parental allowance in the amount of CZK 11,500 per month is cancelled; it will thus be possible to draw allowances up to the amount corresponding to the maternity cash benefits. Therefore, parents with higher income may draw the whole amount of the allowance faster. For parents with multiple births, the aggregate parental allowance increases from CZK 220,000 to CZK 330,000. Parents who would like to make use of this change, however, have to file a new application. In case they have already drawn the original amount of CZK 220,000 and their children have not yet reached four years of age, the parents may again apply for the allowance and draw it up to the new increased limit or until their children reach four years of age.
Furthermore, parents who were not entitled to maternity cash benefits may newly choose to draw parental allowance of up to CZK 7,600 per month and shorten the drawing period up to three years (this predominantly includes students, self-employed persons with no health insurance and unemployed persons). The application for a new allowance amount is again to be made using the respective form.
Increased Rate for the Calculation of Sick Pay
With effect from 1 January 2018, the rates for the calculation of sickness insurance have been increased. What is new, from the 31st calendar day of a temporary incapacity for work or quarantine, the rate increases from 60% to 66% of the daily assessment basis; from the 61st calendar day of a temporary incapacity for work or quarantine, the rate increases from 60% to 72% of the daily assessment basis.
New Allowance – Long-term Care
With effect from 1 June 2018, a new health insurance allowance is being introduced, so-called long-term care allowance. The conditions for the entitlement are as follows: grave worsening of the state of health of the nursed person that requires hospitalisation for at least seven days and, upon discharge, it will be confirmed that all-day care will be necessary for a further 30 days at least; written consent with nursing provided for the respective person; nursing persons may be family members named in the respective Act, without cohabiting with the nursed person (this condition, however, is to be met in case of other natural persons, eg common law husband or wife); the health insurance of the nursing person/employee is to be paid for at least 90 days during the preceding four months and self-employed persons need to have health insurance for the three preceding months; the nursing person is not to perform any gainful employment while nursing.
The allowance will amount to 60% of the reduced daily assessment basis for a maximum of 90 calendar days from the day of discharge of the nursed person from hospital. The allowance is not awarded for days on which long-term care is not provided, eg due to longer hospitalisation.
The nursing person is not entitled to another long-term care allowance before 12 months have gone by since the termination of the last nursing. The employer may refuse the provision of leave from employment only for severe operational reasons.
Travel Costs Compensation in Case of a Business Trip
With effect from 1 January 2018, travel cost compensation rates paid to employees on a business trip change. In case a private motor vehicle is used on a business trip, the employee is entitled to compensation for both wear and tear and consumed fuel. For 2018, the compensation for wear and tear increases to CZK 4.00 per one kilometre travelled. In case employees calculate the compensation for consumed fuels by using prices stipulated in the Regulation, they may apply for a compensation of CZK 30.50 per 1 litre of consumed petrol and CZK 29.80 per 1 litre of consumed diesel oil in 2018. Employees are, of course, entitled to ask for compensation based on real expenses as given on the receipt for the payment of fuels instead of the prices stipulated in the Regulation.
In 2018, domestic meal allowances in the individual time zones are increased as well. Thus, employees are entitled to receive meal allowances in the amount of at least CZK 78 in case a business trip lasts 5 to 12 hours; CZK 119 in case a business trip lasts 12 to 18 hours; and CZK 186 in case a business trip lasts more than 18 hours. The principle of meal allowance reduction remains unchanged.
Change in Basic Foreign Meal Allowances for 2018
On 1 January 2018, a Regulation setting the basic rates of foreign meal allowances for 2018 becomes effective. Basic rates of foreign meal allowances have been increased for several countries, the most important ones including eg Australia (USD 50 to USD 55), Belgium (EUR 45 to EUR 50), the Republic of Korea (EUR 45 to EUR 50) and Great Britain (EUR 40 to EUR 45).
Taxation of Shares Acquired by an Employee from the Parent Company
In case an employee acquires shares from the parent company of his or her employer (ie from a company with which he or she did neither conclude any labour-law relationship nor does he or she perform any activities for such company), the employer is obliged to tax the income acquired in this way pursuant to the Income Taxes Act. Even though from the employee’s point of view, the acquisition of shares is income from employment (as it relates to performing activities for his or her employer), given that costs related to the share plan which the employee joined are not rebilled to his or her direct employer and that the employee did not perform any activities for the parent company, it is impossible to tax this income through payroll, and the employee is therefore obliged to state this income in his or her tax return. Moreover, the income from shares is to be included in the tax return for the period in which the employee acquired the shares.
In the aforementioned cases, it is therefore impossible to provide the employee with an annual tax reconciliation, and the employer should advise the employee to file a tax return. In this respect, we would like to point out that, as part of the international exchange of information, information on acquired shares is provided to the Czech tax administration, which subsequently checks whether the employee complied with his or her obligation to file a tax return and have the income from the acquired shares taxed.