Tax and accounting changes: what awaits us from 2024?

As part of the consolidation of public finances, the government has introduced measures to help the over-indebted treasury, the so-called consolidation or recovery package. It was signed by the President on Wednesday 22 November 2023 and subsequently published in the Collection of Laws. Most of the adjustments concern taxes and other compulsory levies. Read on to find out what the main changes apply from 1 January 2024 (unless otherwise stated for individual items).

Corporate income tax:

• Increase in the corporate tax rate from 19% to 21%;
• introduction of a limit of 2 mill. CZK for the entry price of passenger vehicles for the purpose of tax depreciation;
• abolition of tax deductibility of silent wine as a gift for representation;
• introduction of the possibility not to tax unrealised exchange rate differences.

Value added tax:

• Introduction of three VAT rates: 0%, reduced 12% and basic 21% (10% and 15% rates will be abolished);
• zero rate will apply to books;
• the 12% rate will cover e.g. accommodation and catering services, newspapers and magazines, foodstuffs or construction work on houses and flats;
• The 21% rate will, on the other hand, be newly applied to, for example, hairdressing services, municipal waste collection, or the supply of cut flowers and firewood.

How will the changes affect VAT forms? The VAT return will remain as it is (apart from minor wording changes on selected lines), and the related instructions will be amended.

There will also be no major changes to the control declaration form, mainly in view of the possibility to report the transactions received at the original rates still within the standard 3-year period. For transactions subject to the 12% rate, you will use the Tax Base 2 and Tax 2 fields, which were previously used to report transactions subject to the 15% rate. More information can be found on the website of the Financial Administration of the Czech Republic.

Deductions and personal income tax:

Changes for everyone

• Abolition of tuition fees and student discount;
• limiting the spouse's tax credit to childcare for children up to age 3;
• shifting the threshold for the progressive 23% tax rate from four times to three times the average wage (from January 2024, the new income threshold of CZK 1,582,812 per year or CZK 131,901 per month will apply);
• unification of the tax deduction limit for deposits into pension savings and capital life insurance, while it is also possible to apply this deduction to a new instrument of old-age security, the so-called long-term investment product (LTIP) - in total, up to CZK 48,000 per year can be deducted from the tax base (the limit is common for all three products);
• increase of the threshold for exemption of gratuitous income (gifts) from CZK 15,000 to CZK 50,000 per year;
• introduction of a limit of 40 million CZK. CZK 40,000 in the case of application of the exemption of income from the sale of securities or shares when the time test is met (effective from 2025 - a special definition for the acquisition price will be applicable to shares acquired by the end of 2024);
• Reduction of the limit for exemption of lottery or raffle winnings from 1 mill. The limit for the reduction of the amount of the lottery or raffle to CZK 50,000.

Changes for self-employed persons

• Increase in the sickness insurance rate for self-employed persons by 0.6 percentage point (to 2.7%);
• a increase in the assessment base for social insurance for self-employed persons from 50% to 55%;
• a gradual increase in the minimum social insurance assessment base by 5% per year until 2026 (from the current 25% to 40% of the average wage).

Changes for employees

• Reintroduction of the 0.6% sickness insurance contribution on employees' wages (employers will continue to pay 2.1% for their employees as before);
• limitation of employee non-monetary benefits (contributions to sports and cultural events, use of educational or recreational facilities, etc.) to half of the average wage per year - in 2024 they will be exempt up to CZK 21,983 (if employees use a higher value of benefits during the year, the difference will have to be taxed and the health and social insurance will have to be paid on it);
• capping of tax relief for work performance agreements and introduction of registration of FTEs;
• Adjustment of the rates for the taxation of company cars used also for employees' personal purposes - the previously taxable non-cash income of 1% of the vehicle price will now be divided into two additional rates according to the emission class of the car (a rate of 0.5% will apply for low-emission vehicles and only 0.25% for zero-emission vehicles);
• unification of the exemption of meal allowances up to 70% of the meal allowance for a business trip of 5-12 hours (i.e. CZK 107.10), regardless of the form (meals provided at the workplace, meal vouchers, meal vouchers) - the well-known rule of tax deductibility of a meal voucher up to 55% of its value is completely abolished;
• abolition of the tax deduction for contributions to a trade union;
• abolition of the tax exemption for gratuitous benefits up to CZK 2 000 per year and social assistance to overcome exceptionally difficult circumstances.

Accounting:

• Change in the calculation of net turnover;
• the possibility of keeping accounts in the so-called functional currency - British pounds, euros or US dollars;
• introduction of an obligation to produce a sustainability report.

Excise and energy taxes:

• introduction of a new tax on e-cigarette refills;
• a 10 % tax increase on cigarettes, cigars and smoking tobacco (plus further increases in subsequent years);
• a 10 % increase in excise duty on alcohol in 2024 and also in 2025 (still wine remains unchanged).

Property tax:

• increase in the real estate tax up to 1.8 times from 2024;
• introduction of an inflation coefficient (from 2025 the tax will be automatically increased by inflation for the previous period) - for 2024 the coefficient will be set at 1 and subsequent changes will be announced by the Ministry of Finance by 30 June of the calendar year preceding the tax year.

In addition to changes in the tax and accounting area, the government has also prepared other legislative amendments and measures to reduce the state budget deficit. A complete list can be found on the Ministry of Finance website.