Payroll Newsletter - Winter 2018/2019
Tax changes, news, practical information
The cap on social security payments in 2019 and the increase in the limit of income subject to solidarity surcharge tax
In 2019, the maximum assessment base for social security payments will increase from CZK 1,438,992 to CZK 1,569,552, which coincides with the increase in the limit of income subject to solidarity surcharge tax, which will be paid on income exceeding the amount of CZK 130,796 per month in 2019.
The amount of income determining an employee’s contribution to sickness insurance is CZK 3,000 (increased from the previous amount of CZK 2,500), in the case of contracts to perform a job, the limit remains unchanged – recorded income exceeding CZK 10,000.
An increase in the minimum wage from 1 January 2019
From 1 January 2019, the minimum wage increases by CZK 1,150 to CZK 13,350, the minimum hourly wage increases to CZK 79.80. The lowest limits for wages for the individual groups of jobs will also increase, ranging from CZK 13,350 to CZK 26,700 (eight groups based on the complexity, responsibility and strenuousness of the performed jobs). The increase in the minimum wage influences also the following: the cap for claiming a tax bonus (the annual income amounts to at least six times multiple of the minimum wage/ monthly to at least half of the minimum wage, ie CZK 6,675); the maximum amount of income earned by an employee registered with the labour office (half of the minimum wage), the amount of state social support payments excluding payments determined based on the claimant’s income; an increase in the maximum tax relief for child placement in a pre-school facility (corresponding to the amount of the minimum wage), and an increase in the cap for exempting old age pensions from income tax (increased to 36 times multiple of the minimum wage CZK – 480,600 for 2019).
New amount of the assessment base for health insurance in 2019
In relation to the increase in the minimum wage, the minimum assessment base for health insurance also changes from January 2019, together with the minimum amount of monthly health insurance contributions that persons with no taxable income are obliged to pay and for whom the insurance contributions are covered by the state (students, retired persons, women on maternity leave, recipients of parental allowance, job applicants registered with the labour office etc.).
The minimum assessment base for health insurance for 2019 amounts to CZK 13,350 and the monthly contribution to the health insurance system amounts to CZK 1,803.
Increase in the unseizable amounts for the calculation of executions
From 1 January 2019, the living minimum increases to CZK 9,643. This amount is the base for the calculation of an unseizable amount for one person (2/3 of the base) amounting to CZK 6,428.67, and an unseizable amount for a sustained person (1/4 of the unseizable amount for a person) amounting to CZK 1,607.17.
Change in the calculation of super gross wage from January 2019
From 1 January 2019, the calculation of advance tax on income from dependent activities must take into account in which state the employee participates in the system of compulsory insurance (health and social security insurance). The same treatment will also apply to tax returns commencing from the 2019 taxable period.
If an employee is insured in another EU member state, EEA member state or in Switzerland, it is necessary to modify the calculation: the super gross wage will include the compulsory foreign insurance contributions paid by the employer in the given state.
No changes occur for employees who participate in the system of compulsory health and social insurance in the Czech Republic or in a non-European country: in such a case, the super gross wage will be calculated as the gross taxable income increased by the Czech compulsory insurance contributions paid by the employer, or, more precisely, hypothetical insurance contributions paid in the Czech Republic.
Entitlement to carer’s allowances based on contracts to perform a job and contracts on work activity
We would like to point out that in compliance with Section 39 (5) (b) of Act No. 187/2006 Coll., on Health Insurance, employees performing a gainful activity based on a contract to perform a job or a contract on work activity are not entitled to carer’s allowances.
Compensation for travel expenses incurred on business trips
From 1 January 2019, there is a change in the rates for compensation of travel expenses provided to employees on business trips. Employees using their private motor vehicles for a business trip are entitled to a compensation for wear-and-tear and for the consumed fuel. For the year 2019, the compensation for wear-and-tear on the vehicle increases to CZK 4.10 per kilometre. If an employee claims compensation for the consumed fuel in 2019 using the standard price stated in the underlying regulation, he is entitled to a compensation amounting to CZK 33.10 per litre of consumed petrol or CZK 33.60 for a litre of consumed diesel oil. Naturally, an employee has the right to choose whether he will utilise compensation based on standard rates stated in the underlying regulation or based on the actual expenses documented by bills for fuel purchase.
The year 2019 will also see an increase in the rates for inland meal allowances for the various length of their duration. Employees are newly entitled to minimum meal allowances of CZK 82 for business trips that take 5 to 12 hours, to CZK 124 if the business trip takes longer than 12 but less than 18 hours, and to CZK 195 if the business trip takes more than 18 hours. The principle for reducing meal allowances remains the same.
Changes in basic rates for meal allowances abroad introduced in 2019
As of 1 January 2019, a decree on determining the amount of basic rates for meal allowances abroad came into effect. The basic rates for meal allowances abroad have been increased for several countries, of which we would like to point out especially Argentina (from USD 45 to USD 50), the Netherlands (from EUR 45 to EUR 50), Poland (from EUR 35 to EUR 40), and Saudi Arabia (from EUR 40 to EUR 45).
Average gross wage for Q1 to Q3 of 2018
On 4 December 2018, the Czech Statistical Office announced the average wage for Q1 to Q3 of 2018 amounting to CZK 31,225 (previously, the amount was CZK 28,761). This amount will serve as a basis for calculating the values for the compulsory share on employment of disabled persons in 2018. In order to meet the obligation, employers may choose the so called “alternative performance” whereby the “alternative performance” for the employment of one disabled person corresponds to purchasing products or services amounting to CZK 218,575 net of VAT (31,225 x 7). The levy to be paid to the national budget as an “alternative performance” corresponding to the employment of one disabled person would amount to CZK 78,063 (31,225 x 2.5).
Statistical survey on quarterly average wage (ISPV)
As part of the semi-annual ISPV survey, a new item was introduced for the participating companies, namely the Field of the Highest Completed Education (OBORVZD). The data relevant to this item will be collected for the first time for Q4 of 2018 (the deadline for submitting the data is 25 January 2019). OBORVZD applies to all employees with completed secondary or higher education (all graduates from secondary schools, higher vocational schools, conservatory schools and universities). The item does not apply to employees with elementary or no education. Nor does it apply to employees working based on the contract for work or contract for employment activity, or employees on maternity or parental leave. The structure of the code for OBORVZD in the required format comprises the year of the completion of the studies, code of the school, code of the field of education, code of the study programme (applies only to university education) and the code of the registered office of the school (municipality). To create a code, the following application for the selection of the educational field (Výběr oboru vzdělání) https://www.obory-vzdelani.cz/ is to be used. After entering the data on the employee’s education, the application will generate a 30 digit code.
Taxation of shares acquired by an employee from the parent company
If an employee receives shares from his employer’s parent company (ie a company with which he has no labour relations and for which he does not perform any activity), the employee is obliged, in line with the Income Tax Act, to pay tax on such income. Although the income from obtaining the shares is income from dependent activity (is related to the performance of work for the employee’s employer), the fact that the costs related to the share plan in which the employee participated are not invoiced to the employee’s direct employer and the fact that the employee did not perform any activity for the parent company renders such income non-taxable as part of the payroll records, and the employee is thus obliged to declare such income in his tax return. Income from shares must be included in the tax return for the period in which the employee acquired them.
In the cases stated above, it is impossible to make an annual tax reconciliation for employees and employers should instruct their employees to file their tax returns. In this context, we would like to point out that in line with the principle of international exchange of information, the information on the acquired shares is provided to the Czech taxation authority that examines whether the employee has really fulfilled his obligation to file a tax return and taxed the income gained from the acquired shares.