Abolition of withholding tax on remuneration of members of statutory bodies of legal entities who are tax non-residents

• Until the end of 2025, the income of an executive director or other member of a statutory body who is a Czech tax non-resident is subject to a 15% withholding tax in the Czech Republic.
• However, from 1 January 2026, the income of these members of statutory bodies will be subject to tax advances of 15% to 23%, regardless of their tax residence.
• In addition, if the amount of their income exceeds the threshold for progressive taxation (i.e. 36 times the monthly average salary), they will be obliged to file a tax return in the Czech Republic.

Salary swap limitations

• The amendment to the Income Taxes Act will limit the possibility of transferring part of an employee’s salary or remuneration to the employee benefits system (the so-called salary/bonus swap).
• Salary/bonus swap will no longer be tax-advantaged and these supplies will be subject to both taxation and social security and health insurance contributions from 2026. An exception is, for example, contributions to supplementary pension insurance / DIP, exempt on the basis of another provision of the Income Taxes Act, which do not change.

Limit 40 mil. CZK for the exemption of income from the sale of shares and securities is cancelled

• For 2025, the limit for the exemption of income from the sale of shares and securities if the time test is met is 3 years, or 5 years between acquisition and sale, to the amount of CZK 40 million. When income above this limit is subject to taxation. However, from 1 January 2026, this restriction is lifted and incomes that meet the time test are again exempt without a limit.
• However, beware of income from the sale of crypto-assets – for these incomes, the exemption limit is CZK 40 million. CZK is still valid.

Changes to the current regime of deferred taxation of ESOP income

• As we informed, for example, in the March article, from 1 April 2025, the employer can choose whether the income from the employee share plan will be taxable immediately upon the acquisition of the relevant shares/shares, or whether it decides to postpone the taxation of this income (and notify the tax office of this choice within the deadline).
• From 1 January 2026, the list of moments at which deferred taxation of this income will take place is changing. The maximum period of deferral of taxation is extended from 10 years to 15 years and the moment of change of tax residence of an employee or employer will be deleted.

Qualified employee options

• From January, the Income Taxes Act will include a new optional regime for taxing income from ESOPs, namely qualified employee options. This preferential ESOP tax regime will only be introduced for a narrower group of companies, start-ups and young innovative companies.
• If the conditions defined in the law are met, the income will not be viewed as income from employment, but as so-called other income, whether the option is exercised and shares are acquired, or the option is settled in cash, without the employee’s entry into the ownership structure. Income from exercising a qualifying option will thus not be subject to mandatory social security and health insurance contributions.
• At the same time, income under this regime will be taxed only at the time of sale of the underlying share (but no later than 15 years after the exercise of the qualified option). On the other hand, it will not be possible to apply an exemption to these incomes in the future based on the fulfilment of a 3-year or 5-year time test.
• We dealt with the conditions of this regime in more detail in our July article.

Uniform monthly employer report

• Undoubtedly, the most important change in 2026 for employers will be the obligation to submit a single monthly employer report (JMHZ), which will replace up to 25 different reports.
• The JMHZ Act is effective from 1 January 2026 and employers will have to prepare for this obligation by the end of March. Every employer will be obliged to submit a report from the 1st to the 20th day of the following month. Employers will have to file the JMHZ for the period from January to March by 30 June 2026.
• We have written more about the benefits and challenges of JMHZ in our article.

News in the field of employment of foreigners in 2026

• From January 2026, an amendment to the Act on the Residence of Foreign Nationals will come into force, which will drastically affect foreigners who commit offences in the Czech Republic. A residence permit will now be able to be revoked if a foreigner commits an offence kept in the register of offences under the Act on Certain Offences, repeatedly three times in a row within a period of 12 months.
• From January 2026, the minimum monthly wage will also rise to CZK 22,400. This increase should be reflected by employers of employee card holders, as their agreed remuneration, salary or wage must be higher than the basic rate of the monthly minimum wage, regardless of the scope of work.
• From April 2026, the Ministry of Labour and Social Affairs portal, through which foreigners currently report the entry into employment, their termination and possible other changes, will be cancelled. All these announcements will be implemented from April next year through the above-mentioned JMHZ.

Selected parametric changes

• Minimum wage for 2026: CZK 22,400
• Average salary for 2026: 48,967 CZK
  • The threshold for progressive taxation at a rate of 23% will reach CZK 1,762,812 (CZK 146,901 per month).
  • The maximum assessment base for social security contributions will be CZK 2,350,416.
  • The exemption of leisure benefits remains at half of the average wage, i.e. up to CZK 24,483.50.
  • The exemption of health benefits remains at the level of the monthly average wage, i.e. up to CZK 48,967.
• The limit for the payment of social security and health insurance premiums for agreements to complete a job  (DPP) will increase to CZK 12,000. (The limit for agreements to perform work (DPČ) and small-scale employment remains at CZK 4,500.)
• There should be an increase in the minimum contributions of the self-employed, e.g.:
  • Social insurance (main activity): CZK 5,720
  • Health insurance: CZK 3,306
  • Flat-rate tax in the first band: CZK 9,984