More details on the proposed changes are available on the website of the Ministry of Finance of the Czech Republic.

Overview of selected tax changes of the consolidation and austerity package

Corporate income tax

• Increase in the corporate income tax rate from 19% to 21%.
• Limitation of the tax-deductible purchase price of passenger cars to CZK 2 million.

Personal income tax

• Reduction of the threshold for applying the 23% personal income tax rate from 48 times the average salary to 36 times the average salary.
• Limiting the exemption of income from the sale of securities or shares in a company if the time test of 3 years or 5 years between the acquisition and the sale is met to CZK 40,000,000 per taxpayer.
• Elimination of the exemption for most non-monetary benefits and limitation of the exemption for meal vouchers.
• Reintroduction of 0.6% sickness insurance for employees.
• Changes to the conditions for applying the dependent spouse deduction, the abolition of the deduction for the placement of a child in pre-school and the abolition of the student deduction.
• Reduction of the limit for the exemption of lottery winnings from CZK 1,000,000 to CZK 50,000.

Insurance contributions for self-employed persons

• Increase in the minimum assessment base for social insurance for self-employed persons.
• Increase in the assessment base for social security and health insurance to at least 55% of the tax base instead of the current 50%.
• Restrictions on the use of work agreements outside the employment, especially regarding their accumulation.
• Introduction of a common assessment base for spouses.

Value added tax

• Merging two reduced VAT rates into one 12% rate.
• The new reduced VAT rate of 12% will apply primarily to food, medicine, magazines, constructions for residential housing and medical devices.
• Draught beer, hairdressing services, beverages, firewood, and more will move to the standard VAT rate of 21%.
• Books will not be subject to VAT.

Excise taxes

• Non-sparkling wine remains exempt from excise duty.
• Increase in excise duties on tobacco and alcohol.

There are also plans to increase the real estate tax or gambling tax, abolish the possibility of providing non-sparkling wine as a tax-deductible gift up to CZK 500, modify the state contribution to building savings, etc.

In the coming months, we will monitor how the individual measures will be translated into the relevant legislation and with what effect. The proposed changes can be expected to apply as early as 2024. We will keep you informed of all these developments on our blog and in the dReport newsletter, as well as in regular webcasts and seminars we organise on tax and legal news. Information about our tax consulting services (and other services we provide) can be found on our website.