In its judgment in Case no. 10 Afs 61/2022-41, Isolit‑Bravo, spol. s r. o., of 7 February 2023, the Supreme Administrative Court considers a situation where the relevant company, as the seller of consumer products under the Bravo brand, provided employees of its dealers with “KONTO BRAVO chequebooks” to which those employees could put stickers (coupons) from warranty certificates of appliances they sold. When the entire chequebook was filled with coupons, the employees of the customer received a financial bonus from the company corresponding to the value of the coupons placed in the chequebook. The tax administrator assessed bonuses paid in this manner as income related to employment pursuant to Section 6 (1) (d) of Act No. 586/1992 Coll., on Income Taxes, (the “ITA”), and the company filed a legal action against said assessment.

The judgment of the Supreme Administrative Court confirms the previous conclusion of the Regional Court that, within the meaning of Section 6 (1) (D) of the ITA, a taxpayer is also a taxable entity from which the taxpayer receives an income related to the performance of their (primary) employment, although the taxpayer does not perform employment with the respective taxable entity. The Supreme Administrative Court further states that the definition of an employer in Section 6 (2) of the ITA is important for the specification of the person liable to pay income tax as the taxpayer. Therefore, for the purposes of the ITA, all taxpayers pursuant to Section 6 (1) (A) through d) of the ITA will be considered “employers”.

The Supreme Administrative Court also refers to its previous judgment of 24 October 2018, Case no. 1 Afs 162/2018‑39, Československá obchodní banka, which deals with a situation where the complainant offered an incentive plan (non-pecuniary winnings) to employees of the Česká pošta state enterprise if they offered its products. In the relevant case, ČSOB paid income tax on the bonuses paid to the employees of Česká pošta; however, the judgment confirms that the income of the employees of Česká pošta received from ČSOB should be taxed as employment. Nevertheless, it does not automatically follow from the above that social security and health insurance contributions should be paid as well.

In conclusion, we would like to point out that the above is relevant to bonuses provided to employees of your customers; however, different steps are taken in the case of bonuses provided to your customers. The Supreme Administrative Court confirmed that bonuses provided as part of customer plans do not fall within the reasoning pursuant to Section 6 (1) (d) of the ITA.