Tax 

A discount on social security contributions for working seniors

Working seniors are to receive a discount on their insurance premiums instead of an increase in the old-age pension for paid employment alongside their old-age pension. This means higher net earnings from employment or business activities. The Czech Ministry of Labour and Social Affairs thus wants to motivate seniors not to retire, but to remain employed or in business. The forthcoming change is at the draft stage to be discussed by the government. It could come into force as early as 1 July 2023, but 2024 seems more likely.

The old-age pension will no longer be slightly increased for the gainful activity carried out from the effective date of the new legislation, but the senior citizen will receive a discount on the insurance premium equal to 100% of the premium paid by the employee. For employed pensioners, this will mean a 6.5% increase in net pay or salary. For example, a gross salary of CZK 25,000 per month equates to a saving of CZK 1,625 on insurance premiums, increasing the net income by that amount.

The discount on insurance premiums shall also apply to those who run a business in retirement. Their percentage rate of advance payment of premiums will drop from the current 29.2% to 22.7%.

“The aim is to encourage old-age pension beneficiaries to remain on the labour market for a longer period of time. Simultaneously, the change will help at a time of increased demand for workers and, as a result, further positive budgetary effects can be expected, not only in the long term but also in the relatively short term,” the ministry says.

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