Payroll Newsletter - Winter 2022

Maximum assessment base for social security contributions in 2022

The maximum assessment base for social security contributions in 2022 increases from CZK 1,701,168 to CZK 1,867,728. There is no change in the relevant income for an employee to participate in the sickness insurance scheme, i.e. it remains CZK 3,500. For agreements to perform work, the limit of settled income stays of CZK 10,000 continues to apply.

Increase in the minimum wage starting from 1 January 2022

Since 1 January 2022, the minimum wage has been increased by CZK 1,000 to CZK 16,200; the minimum hourly wage has been increased to CZK 96.40. The bottom levels of guaranteed wages for individual work groups have also been increased to CZK 16,200 up to CZK 32,400 (8 groups depending on complexity, responsibility and strenuousness of the work performed). The increase in the minimum wage has an effect, for example, on the limit establishing entitlement to a tax bonus (the annual income amounts to at least six times the minimum wage/at least half of the minimum wage per month, i.e. CZK 8,100); the maximum amount of earnings of a job seeker registered by the Labour Office (half of the minimum wage); the amount of state social support allowances except for allowances reflecting the applicant´s income; increase in the maximum tax relief for the placement of a child in a pre-school facility (in the amount of minimum wage); increase in the limit to exempt pensions from income tax (up to a 36 multiple of the minimum wage - CZK 583,200 for 2022).

New amount of the minimum assessment base for health insurance in 2022

With respect to the change in the minimum wage since January 2022, there has been an increase in the minimum assessment base for health insurance and thus the minimum amount of the monthly premium to be paid by individuals with no taxable income that is paid of, for example, the so-called state categories of the insured (students, old age pensioners, women on maternity leave, recipients of parental allowances, job seekers registered by the Labour Office, etc.)
The minimum monthly assessment base for health insurance in 2022 amounts to CZK 16,200 and the monthly premium to CZK 2,187.

Changes in the basic rates of meal allowance for trips abroad for 2022

Since 1 January 2022, foreign meal allowances for certain countries are subject to changes. The countries affected by the change are: France (EUR 50), Croatia (EUR 40), Hungary, Romania (EUR 40), and Liechtenstein (CHF 65). The change will also affect some non-EU countries, such as Algeria, Ethiopia (EUR 50), Georgia, and Pakistan (EUR 40).  

Reimbursement of business trip expenses

Since 1 January 2022, adjustments have been made to the rates of reimbursement of travel expenses paid to employees on business trips. In connection with the use of a private car for a business trip, employees are entitled to compensation for car wear and consumed fuel. The compensation for car wear has been increased to CZK 4.70 per km driven in 2022. If employees claim compensation for consumed fuel using the prices published in a regulation, they may request compensation of CZK 37.10 per 1 litre of consumed petrol, CZK 36.10 per 1 litre of consumed diesel oil and CZK 4.10 per 1 kilowatt-hour of consumed electricity. Instead of prices determined by a regulation, employees are naturally entitled to claim compensation based on their actual expenses determined using confirmations of fuel payment.

In 2022, local meal allowance rates will be increased in individual time zones. Newly, employees are entitled to a meal allowance of at least CZK 99 if their business trip takes from 5 to 12 hours; CZK 151 if their business trip takes more than 12 hours but less than 18 hours; and CZK 237 if their business trip exceeds 18 hours. The principle of meal allowance reduction remains the same.

Meal-voucher flat rate

Monetary meal contribution (meal-voucher flat rate) is exempt from income tax on the part of employees up to a certain limit, which is 70 % of the upper limit of meal allowance that may be provided to employees remunerated through pay on a business trip between 5 to 12 hours. In 2022, the meal-voucher flat rate determined in this manner will be exempt up to CZK 82,60 per shift. If the employer provides a higher meal flat rate the difference has to be taxed within the employee´s wage and social and health insurance contributions have to be paid from the difference.

Average gross wage for a period from the first to the third quarter 2021

On 13 December 2021, the Czech Statistical Office published the average wage for a period between the first the third quarter of 2021 in the amount of CZK 37,047 (the previous amount was CZK 34,611). This amount is used to calculate values for meeting the obligatory proportion of disabled individuals in 2021. In order to compensate one disabled person with a ”substitute performance”, products and services of CZK 259,329 excluding VAT need to be consumed (37,047 x 7). Contribution to the state budget relating to one vacant full-time position that should have been staffed with a disabled person would be CZK 92,617.50 (37,047 x 2.5).

Amount of tax relief for child placement (pre-school allowance)

The minimum wage amount has an effect on the maximum amount of tax relief for a child placed in a pre-school facility, i.e. the pre-school allowance. The relief equals the minimum wage. This means that while in 2021 parents having a child in a kindergarten might utilise tax relief of up to CZK 15,200, this year the amount is CZK 16,200.

Upper limit for applying progressive income tax

Since 2021, natural persons´ income has been taxed at a 15 % tax rate up to the tax base limit in the amount of a 48 multiple of the average wage (i.e. up to CZK 155,644 per month and CZK 1,867,728 per year in 2022). The annual tax base beyond a 48 multiple of the average wage will be taxed with an increased rate of 23 %.

Increased tax relief per taxpayer

Since 1 January 2022, the relief per taxpayer has been increased to CZK 30,840 per year (CZK 2,570 per month – the monthly increase amounts to CZK 250).

Increased tax allowances for children

The Income Taxes Act stipulates the increase in tax allowances for children already for the 2021 taxation period. The new amounts will be applied retrospectively after the 2021 taxation period has ended, specifically in the annual tax reconciliation or in the personal income tax return. The increase will newly apply on a monthly basis from January 2022. The change in the amount of tax allowances applies to the second, third and every subsequent child. Tax allowances for the first child remain unchanged:

Cancellation of the tax bonus limit

Since 1 January 2022, the maximum amount of the tax bonus paid for dependent children has been cancelled, and the amount may newly exceed CZK 60,300. The condition of the minimum annual income generated from employment or business in the amount of six times the minimum wage, i.e. CZK 97,200 for 2022, still applies.

Withholding tax

The relevant income for participation in the sickness insurance scheme is also taken into consideration for the limit for withholding tax on income arising from an agreement to perform work or an employment relation if an employee provided no tax declaration – CZK 3,500 in 2022. In respect of agreements to perform work, the limit of accounted for income of CZK 10,000 continues to apply.

Increase in the amount of wages exempt from garnishment starting from January 2022

Since 1 January 2022, the basic amount of wages exempt from garnishment used to calculate enforcement, insolvency, statutory and agreed deductions has been increased to CZK 8,006.25 (based on the increase in the regulatory housing expenses to CZK 6,815). The liable person´s amount exempt from garnishment is newly increased to CZK 2,668.75. The level above which the liable person´s wage is subject to sanctions without limitation will be CZK 21,350.

Enforcement of wage deductions – news

”Summer of Mercy” until 28 February 2022

In order to be able to use the benefits of the Summer of Mercy, employees have to comply with the following three conditions:

1. The debtor has a debt to the Government or a public-law institution. These are public-law entities and institutions such as ČEZ, public transport companies, Česká televize (Czech TV), Český rozhlas (Czech Radio) or all the health insurance companies.
2. The debt is subject to enforcement proceedings.
3. The enforcement of a judgment is led by a private licensed enforcement agent. (Enforcement of a judgment led by the state, i.e. enforcement of a judgment enforceable by the Customs Administration, Financial Administration or the Regional Social Security Administration is excluded).  

Compensatory child support

Since 1 July 2021, employees/parents may apply for compensatory child support – a social contribution paid by the Labour Office under the following conditions:

• There must be court-ordered child support or an agreement on child support approved by a court.
• The child must be of compulsory school age under the Czech law, i.e. under 15. Older children have to submit a student certificate or their health certificate. Detailed information on the compulsory school age can be found in the Act on State Social Support (Act No. 117/1995 Coll.).
• The child must have permanent residency in the Czech Republic.
• The enforcement of due child support must be commenced.
• The maximum amount of compensatory child support is CZK 3,000 per month and can be received for 24 months.

Employer costs

With effect from 1 January 2022, employers can deduct costs for conducting employees’ enforcement of judgments. The flat-rate cost compensation deducted in the benefit of the employer or other selected wage payer (Section 301 of the Civil Procedure Code) amounts to CZK 50 per debtor per calendar month. The cost compensation can be claimed by the employer / another wage payer only if the enforcement deduction has been performed.

Tax relief for ceased enforcement proceedings

On 1 January 2022, the new amendment to the Income Taxes Act came into effect, within which new tax relief for ceased enforcement proceedings was introduced. The tax relief is based on a change in the Enforcement Code and will apply to low-value claims not exceeding CZK 1,500 (without interest and fees), for which nothing has been collected in the last three years, not even after receiving a notice by a licensed enforcement agent. The enforcement proceedings will be ceased and the creditor will be entitled to compensation amounting to 30% of the original debt, specifically in the form of a deduction of the compensation from his/her income tax (no monetary performance). The enforcement agent will decide on the compensation in the resolution to cease enforcement proceedings. The maximum relief per ceased enforcement proceedings amounts to CZK 450 (30% of CZK 1,500).

The legislation targets low-value claims arising, for example, from fines inflicted in the public transport, telecommunications, health insurance companies, or from municipal waste collection fees, etc. commenced in 2019, 2020 and 2021 (three years before Act No. 286/2021 Coll. took effect) and not collected even in part. It is annual tax relief that the taxpayer (creditor) can utilise in his/her tax return or the employee (creditor) in his/her annual tax reconciliation. The employee must include the amount of compensation granted for the ceased enforcement proceedings in the annual tax reconciliation and must submit the enforcement agent´s resolution. The tax relief can be utilised by both natural and juridical persons. In case that no tax obligation arises for the creditor in the year when the enforcement proceedings were ceased, he/she does not receive anything and the relief loses validity.

Changes in the reduction limits

Since 1 January 2022, the reduction limits to calculate income reimbursement and sickness benefit have changed. The amounts are stated in the table below:

Change in the sample form for the Request for Annual Account of Prepayments and Tax Benefits for Tax Period 2021

On 13 December 2021, the General Financial Directorate published a new sample form for the Request for Annual Account of Prepayments and Tax Benefits for Tax Period 2021 – form 25 5457/B – sample no. 2. Sample no. 2 is intended for taxpayers who apply for the annual account of prepayments and tax benefits for tax period 2021 with the taxable entity.

The form addresses the change in the Income Taxes Act that took effect on 1 January 2022 relating to the utilisation of the tax base’s non-taxable part – deduction of interest on a loan for financing housing needs. In case that taxpayers who do not utilise interest on a loan for financing housing need use the previous form for the Request for Annual Account of prepayments and Tax Benefits – sample no. 1, which is still in the tax form database, the above procedure will still be accepted by the Financial Administration of the Czech Republic.

Antivirus programme – regime A and B

Last year in November, the Government approved an extension of the Antivirus programme regime A to 28 February 2022. On 1 November, regime B was launched. 

Owing to the fact that cost deductibility within regime B has been suspended since 1 January 2022, contributions from the Antivirus programme can be applied since January 2022 only within regime A. 

Employers may draw funds to cover costs incurred by the payment of income compensation to an employee for the period of ordered quarantine or isolation equal to 80% of income compensation and insurance contributions paid. The maximum amount per employee is CZK 39,000.  

Within regime B, for November and December 2021, the employer could also be provided with compensation for costs incurred by the payment of income compensation to employees due to, among other things, the decline in sales equal to 60% of income compensation paid including insurance contributions. The maximum amount per employee was CZK 29,000.  The Antivirus programme will apply until 30 June 2022. During this period, the Government may extend the validity of individual regimes. The new deadline for closing the agreement on the provision of the Antivirus programme contribution between the Labour Office of the Czech Republic and an employer is 28 February 2022. 

Increase in the nursing care allowance

The crisis nursing care allowance increased to 80% of the daily assessment base for cases where entitlement to the nursing care allowance arose from 1 November 2021 (retrospectively) to 28 February 2022. The increase applies to family member care and not only to care in relation to COVID-19. For family member care that took 9/16 days, the Czech Social Security Administration reimburses the rest of the amount automatically (the time limit for processing the reimbursement is 90 days). For full-time employees, the daily minimum amounts to CZK 400. The condition of a shared household for family members in direct line has been lifted, and during the care, carers can take turns multiple times except for turns on the same calendar day.

Due to COVID-19, the support period for the crisis nursing care allowance is unlimited - it will be paid per calendar month, and a new statutory declaration form substitutes the confirmation of school closure. Persons working under an agreement to perform work or an agreement to complete a job are also entitled to the nursing care allowance if they participate in the sickness insurance scheme.

Isolation bonus – extraordinary contribution to employees under quarantine or isolation

The isolation bonus is an extraordinary contribution in the amount of up to CZK 370 per day to compensate for the income of employees under quarantine or isolation. It applies to quarantines and isolations that started no earlier than 1 December 2021 and lasted until the Act's effective date, i.e. 23 December 2021. In conjunction with the income compensation, the bonus must not exceed 90% of average hourly earnings. Employees working under an agreement to perform work or an agreement to complete a job are also entitled to this bonus provided they participate in the sickness insurance scheme and are entitled to income compensation.

The employer can deduct the amounts paid for the bonus from the amount of social security insurance within three months after the end of the employee´s quarantine.

Change in the limits of mortgage interest

The state supports own housing with the possibility to deduct interest on a housing loan of up to CZK 300,000 for financing housing needs acquired prior to 1 January 2021 and newly of up to CZK 150,000 for financing housing needs acquired after 1 January 2021. When both housing needs are combined, the maximum annual limit of CZK 300,000 applies.