The Ministry of Finance has submitted a draft law on the registration of sales and on the amendment of certain other acts. The proposed legislation envisages the reintroduction of electronic registration of sales with effect from 1 January 2027. This change is closely related to an amendment to Act No. 586/1992 Coll., on Income Taxes, as amended (hereinafter referred to as the "ITA"). The proposal contains two basic directions of change: to mitigate the effects of the new obligation to register sales electronically by introducing a new EET OFF regime for the smallest entrepreneurs and to reconfigure the tax regime for selected employee benefits and to restore some previously abolished tax reliefs.
The core of the proposed changes lies in the creation of a special regime for small entrepreneurs in the first band of the flat-rate tax regime, who may, subject to statutory conditions, be exempted from the obligation to register sales in exchange for an increase in their flat-rate tax burden in the form of a surcharge. In addition, the amendment reintroduces the EET tax credit.
Surcharge as an alternative to the registration of sales
A fundamental novelty is the insertion of a new Section 2b into the ITA. It introduces the category of a “taxpayer registered for a surcharge exempting them from the obligation to register sales”. In practice, it is a special subset of natural persons in the flat-rate regime, specifically in its first band.
The purpose of the new regulation is to allow the smallest entrepreneurs to avoid registering sales if they accept an increase in tax liability instead.
A taxpayer may opt for the surcharge only if they:
This regime is therefore constructed narrowly and selectively. The explanatory memorandum explicitly emphasizes that the possibility of being exempted from the obligation to register sales by increasing income tax is offered only to specified natural persons. Legal entities are not affected by such a procedure.
Commencement and termination of registration for the surcharge
Registration for the surcharge arises in principle as of the beginning of the tax period. An exception is the situation where the taxpayer commences self-employment during the year and at the same time enters the first band of the flat-rate regime. In such a case, they can become a taxpayer registered for the surcharge from the first day of the calendar month in which they commence that activity.
The situation of interruption and subsequent resumption of activity in the same tax period is also specifically regulated. If the taxpayer has been registered for the surcharge and resumes their activity after the interruption, then the registration for the surcharge will be “renewed” automatically.
The termination of the registration for the surcharge occurs in three basic ways. The first is exceeding the limit of CZK 1,000,000 of income from self-employment, in which case the taxpayer ceases to be registered at the end of the relevant tax period. The second way is the loss of the taxpayer’s status in the first band of the flat-rate regime or in the flat-rate regime altogether. The third is voluntary deregistration by means of a special notification.
The law therefore assumes both the automatic termination of registration if the conditions are not met, and voluntary deregistration. In both cases, emphasis is placed on the continuity of the flat-rate regime and on the timely notification obligation towards the tax administrator.
Calculation of the surcharge and its impact on the flat-rate tax
The newly proposed Section 38lk(8) of the Income Taxes Act provides that the surcharge amounts to CZK 1,400 per month. As the standard monthly advance payment of income tax in the first band of the flat-rate regime is CZK 100, a taxpayer subject to the surcharge will instead pay CZK 1,500 per month.
The surcharge is therefore not a separate tax but functionally builds on the advance payment and the final tax liability. It is designed as a specific increase in the tax burden for the months in which the taxpayer was legitimately exempt from the obligation to record sales.
The amendment further regulates the tax treatment of the surcharge within the flat-rate tax regime, distinguishing between justified and unjustified registration for the surcharge.
EET tax credit – reinstatement of a well-known instrument
Another change is the introduction of an EET tax credit under Section 35be of the Income Taxes Act. This is a measure that previously existed in Czech tax law in connection with the original Act on the Registration of Sales and was abolished together with the termination of EET as of 1 January 2023.
The proposed tax credit amounts to CZK 5,000; however, it may not exceed the amount corresponding to the positive difference between 15% of the partial tax base from self-employment and the basic taxpayer credit. The structure therefore prevents the credit from exceeding the actual tax liability attributable to income from self-employment after deduction of the basic taxpayer credit.
The credit may be claimed only in the first tax period commencing on or after 1 January 2027 in which the taxpayer first records a sale that they are required to register under the new Act on the Registration of Sales. It is therefore neither a recurring nor a permanent relief, but a one-off measure linked to the taxpayer’s initial entry into the registration regime.
Reconfiguration of employee benefits
The second large group of changes concerns employee benefits in terms of their taxation as employment income at the level of employees, and in terms of their tax deductibility on the part of the employer.
First of all, it is proposed to remove the current limit for the exemption of non-monetary income in the form of leisure benefits provided to employees, with the exception of the provision of recreation and package holidays. Accordingly, in the case of benefits under Section 6(9)(d), point 2 of the ITA, the general annual limit amounting to one half of the average wage will no longer apply. At the same time, however, the legislator extends the requirement that the form and scope of such benefits be customary and proportionate not only in the form of participation in social events, but also in the case of contributions to cultural or sporting events. An important novelty is the addition of an exemption for non-monetary contributions to selected social services of a community nature, namely personal assistance, home care services, emergency response services, relief services, early intervention services, day service centres and day-care centres, if they are provided on the basis of authorisation under the Social Services Act.
The provision of recreation and package tours is now moved to a separate point and returns to the regime valid before 31 December 2023. It will therefore again be exempt only up to the total amount of CZK 20,000 per tax period.
However, the limit for the exemption of non-monetary income remains in place in the case of health benefits under Section 6(9)(d), point 1 of the ITA.
In connection with these changes, Section 25(1)(h) of the ITA, i.e. the list of tax-non-deductible expenses, is also amended. The changes reflect the new definition of exempt benefits on the part of the employee. The costs of these non-monetary benefits remain in principle tax-non-deductible for the employer, thus maintaining the traditional construction that the benefit is either tax-advantaged on the part of the employee or tax deductible on the part of the employer.
Exemption of tips in food service activities
A noteworthy change is the new wording of Section 6(9)(g) of the Income Taxes Act, which introduces a partial exemption of tips for employees in food service activities.
The exemption applies only to employees, not to self-employed persons. It covers only tips voluntarily provided by the customer in direct connection with the provision of catering services and within a food service establishment where meals are prepared and sold and consumed on the premises. The proposal therefore excludes, for example, mandatory charges such as couvert, as well as stalls or food trucks without facilities for on-site consumption. It is important that the exemption applies to employees who come into direct contact with the customer when providing the food service or who prepare meals for customers. This clearly targets positions such as waiters, waitresses, bartenders or cooks.
The exemption is capped at a total amount of 7% of the employer’s monthly income from food service activities. This limit may be allocated among employees either in amounts determined by the employer or, subsidiarily, equally among all employees who received tips in the given month.
Reintroduction of selected tax reliefs
Another group of changes concerns the new provisions of Sections 35bc to 35bd of the ITA which regulate certain tax reliefs.
It is proposed to reinstate the student tax credit of CZK 4,020 per year. The entitlement arises for a taxpayer who is systematically preparing for a future profession up to the age of 26, or up to 28 years of age in full-time doctoral studies. This is essentially a return to the situation in force until 31 December 2023.
The childcare facility tax credit (the so-called kindergarten tax credit) is also being reinstated. The amount of the credit corresponds to the demonstrably incurred expenses incurred for placing a dependent child in a pre-school facility, but up to a maximum of the minimum wage for each child.
However, the proposal brings an important novelty for cases where a child lives in several jointly managed households. In such a case, the maximum amount of the credit is divided equally among the respective households, unless the taxpayers agree otherwise in writing. It is a practical response to the model of alternating care or other forms of shared care.
The credit is conditional on the fact that the child lives with the taxpayer in a joint household for at least part of the tax period and that the same expenses have not been claimed by the taxpayer as a tax-deductible expense at the same time.
The renewal of the childcare facility tax credit is also related to the new Section 38t (8) of the ITA, which imposes an obligation on pre-school facilities to submit electronic notifications to the tax administrator containing individualized data on children, taxpayers and the amounts paid by them. The aim is to prevent duplicate claiming of the credit or claims exceeding the legal limit.
Proposed effective date and transitional provisions
The general effective date of the proposed amendments is set for 1 January 2027.
The transitional provisions confirm the general rule that the existing legislation shall apply to tax periods commencing before the effective date of the amendment. At the same time, the proposal includes specific rules for non-cash benefits provided to employees from the effective date of the Act, in order to ensure that the new benefits regime and the relocation of social events to a different provision apply immediately as of the effective date, irrespective of any differing accounting periods of employers.
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