Top 10 employee benefits and their tax (dis)deductibility

In addition to the salary, interesting workload and a relaxed team, the company's benefits also contribute to employee satisfaction. In addition, they will also help you with recruitment. However, setting up benefits translates into the tax burden of the company and the employees. Take a look at the different types of benefits and their tax implications to see which ones are most beneficial for you and your employees.

What are employee benefits?

Employee benefits (also known as perquisites) are non-financial or financial rewards that an employer provides to its employees over and above their basic pay. These benefits promote employee motivation, loyalty and satisfaction, and thus translate into labour productivity.

Some benefits are tax-advantaged and can pay off for you as an employer and for your employee in terms of taxes and insurance contributions. Generally, benefits are divided into:

* Although the company car is a non-cash benefit, its use by the employee is added to his/her wages/salary and is always subject to income tax and social and health insurance contributions.

The same rule applies to other non-cash benefits (except for health benefits) - they are exempt from income tax only if they do not exceed half of the current average wage for the employee in the whole year (for 2025 this amount is CZK 23,278, in 2024 it was CZK 21,983). Anything above this threshold is a tax deductible expense for the employer, but for the employee it is already taxable income and therefore subject to income tax and levies.

Main types of company benefits and tax deductibility

Benefits differ in form and nature and therefore also differ in terms of taxation. Some will please employees because they are exempt from income taxes, while others can be claimed as a tax expense by you. A few of them even meet both conditions, making it an ideal benefit for both parties. See below for specific information on each category.

1/ Meals

Meals as a benefit can take several forms:

• A non-cash contribution for meals is the provision of your own catering facilities.
• The monetary contribution is represented by meal vouchers, electronic meal cards and meal allowances (i.e. money for meals that you give to the employee over and above the salary).

Meal allowances are taxed according to the rules set out in Section 6(9)(b) of the ITA. However, they are tax exempt up to a limit of 70% of the upper limit of the domestic meal allowance that can be provided to an employee (i.e. CZK 123.90 in 2025, compared to CZK 116.20 in 2024).

At the same time, you need to make sure that you have a meal allowance for employees enshrined in internal regulations or in a collective or employment agreement.

Other conditions for tax exemption of the allowance up to the limit of CZK 123.90(the amount applies for 2025):

• The employee does not have to work in shifts, but must work at least 3 hours in a given calendar day.
• For a shift longer than 11 hours including breaks, a second meal allowance may be provided with an exemption up to the limit of CZK 123.90 per shift.

2/ Contributions to insurance and supplementary old-age insurance

An employer may contribute to its employees, for example:

• life insurance,
• supplementary pension insurance,
• long-term investment product (so-called DIP).

For employers: if provided for in the internal regulations, this is a tax deductible expense.

For employees: the contribution is exempt from income tax up to CZK 50,000 per year (the limit applies to all the financial products mentioned together).

3/ Bonus and 13th salary

The financial bonus, 13th or 14th salary falls under cash benefits and is thus subject to income tax and social security and health insurance payments in the same way as ordinary wages. The 13th salary is usually paid during December or early January and the 14th salary is usually paid mid-year (sometimes taken as a summer holiday allowance).

For employers: the 13th salary and bonuses are tax deductible expenses for the company and are taxed in the same way as normal wages.

For the employee: the 13th salary, bonuses and bonuses are part of the gross salary and therefore subject to income tax and insurance contributions. The employee will therefore receive a net amount after all deductions along with the salary.

4/ Home office

Home office or working from home is an increasingly common company benefit that many employees demand. Since the employee does not work from the office but from his own home, he can claim reimbursement of expenses (electricity, water, heating, etc.).

Reimbursement can be provided in the following ways:

• reimbursement of actual costs,
• by reimbursement of a flat-rate according to the decree of the Ministry of Labour and Social Affairs.

The employer may also agree with the employee not to pay compensation.

What about the taxation of home office compensation?

For the employer: home office reimbursements are a tax deductible expense for the employer if they are paid in the ways mentioned above (lump sum or real costs).

For employees: if the compensation does not exceed the limit set by the Ministry of Labour and Social Affairs (currently CZK 4.8/hour), it is not subject to tax or insurance. If the amount paid by the employer exceeds this limit, it is subject to standard taxation and contributions.

5/ Company vehicle and transport allowances

A company car is essential for some types of professions, but it can also serve as a great benefit for employees. This is if you give them the opportunity to use the vehicle not only for business travel but also for private purposes.

In addition, you can provide your employees with an allowance for transport to work, which will make their daily commute financially easier.

A) Provision of a motor vehicle free of charge for business and private use

For employers: costs related to cars are tax deductible for employers, except for fuel costs for employees' private use.

For employees: if the employee also uses the car for personal purposes, this is taken as income. The taxable wage then enters the amount as:

• 1% of the entry price for a normal vehicle (running on petrol or diesel),
• 0.5% of the entry price for a low-emission vehicle (hybrid cars),
• 0.25% of the entry price for a zero-emission vehicle (typically electric cars).

This amount is calculated as income on the entry price of the vehicle, including VAT, and for each calendar month of the vehicle, at least CZK 1 000 each time.

B) Transport allowance

For employers: this is a tax-deductible expense if it is specified in internal regulations or a collective or other agreement.

For the employee: whether it is a sum of money or the provision of transport by the employer, it is income subject to taxation and insurance contributions.

6/ Extra leave and sick days

Extra leave is that part of the leave which exceeds the statutory limit of 4 weeks.

Sick days are specific to both employees and employers in that they are not subject to any special rules set by law. Sick days can be paid in various ways, most often at the rate of average earnings, but it depends on the employer's decision.

Sick days cannot be carried over to the next year and you are not obliged to pay them when you leave your job, when you move from maternity leave to parental leave, etc.

For employers: the cost of the extra holiday is tax deductible for the employer and is paid in the form of a wage replacement, which is subject to standard insurance contributions and income tax.

For the employee: Extra leave is treated as a non-monetary benefit, but as the employee receives a salary replacement, it is subject to standard taxation and deductions as income.

7/ Educational allowances

Employee training allowances are of value to both employees and employers who can benefit from the newly acquired experience and skills of their employees.

How does the taxation of training courses, workshops, etc. work ?

For employers: to be a tax deductible expense from the employer's point of view, the training must be job-related (e.g. an accounting course for accountants, not a drawing course)

For employees: in order for the employee not to have to pay tax on the training allowance, it must be provided in kind - i.e. you will reimburse the invoice directly to the training agency.

8/ Multisport card

The Multisport card is an employee benefit that allows you to use one free or discounted entry to a network of relaxation and exercise facilities across the country every day.

For employers. However, the company does not pay social security and health insurance contributions on the amount, so it is still a saving for the company compared to the salary increase.

For employees: the Multisport card is exempt from income tax and national insurance contributions if, together with other non-monetary benefits, it does not exceed half of the current average wage. If the employee pays for the card in part or in full, the cost of the card is always deducted from the employee's net pay.

9/ Company nursery

One way to encourage and motivate working parents is through a company daycare. A popular benefit that eases a parent's return to work, reduces recruitment costs and saves parents time and money.

The passing of the consolidation package at the beginning of 2024 has also affected the taxation of company nurseries, which are now no longer fully exempt.

For employers: company-run nurseries are subject to the same laws as other private nursery providers and must therefore meet the legal requirements for premises, hygiene etc. The employer typically pays for their establishment and operation.

For employees: company nurseries as well as other selected benefits (according to Section 6(9)(d) of the Income Tax Act) are exempt from tax from 2024 up to a uniform limit of half of the average annual wage. Anything above this amount enters the employee's income and is subject to taxation and levies.

10/ Other refreshments outside the meal allowance

In addition to the meal allowances described above, there are also benefits including small refreshments in the workplace, which more and more employers nowadays offer, for example in the form of a company breakfast or refreshments during a meeting.

A) Working lunch

For these benefits, make sure that the benefits are reasonable. In particular, the authorities check here that there is no abuse and self-enrichment.

For employers: Expenses for working lunch are considered a non-taxable expense.

For employees: a working lunch with a client, for example, is treated as part of the performance of work and is therefore not taxable or counted against the daily limit of CZK 123.90.

B) Refreshments

As part of the catering, you may purchase small snacks in the form of soft drinks, coffee, fruit, biscuits, yoghurt, etc. for the workplace.

For employers: expenditure on snacks in the workplace is treated as a non-tax expense. The only thing that can be counted as a tax deductible expense is drinking water (still water - bottled or tap).

For employees: it counts as a means of improving work performance. Therefore, it is not taxable or subject to the daily meal limit.

How to account for employee benefits?

The accounting for employee benefits has long been inconsistent. Some companies have expensed them, which has affected their profit or loss, while others have charged them to equity. This made it difficult to compare financial statements between companies.

The National Accounting Standards Board's new June 2025 interpretation I-52 finally brings everything into line. It defines employee benefits as all benefits that an employer provides to employees in return for their work. These are entitlements arising from contracts, internal regulations or binding commitments. They can be monetary or non-monetary and are provided in the short or long term.

Therefore, Interpretation I-52 advocates recognizing benefits as an expense. This is because an employee's work is essentially a consumption of an external resource, like any other service. Thus, the cost of wages and benefits belongs to the period in which the employee performed the work. Accounting for benefits is then based on accrual as follows:

• Short-term benefits - are payable within one year; they are recognised as both an expense and a liability.
• Long-term benefits - are payable over a period longer than 1 year; therefore, they are recognised on an ongoing basis and the value of the liability changes over time.

We can help you set up your benefits and payroll

Conditions in the financial world are constantly changing, and if you are unsure how to apply the new limits to your existing benefits scheme, or want to ensure your benefits programme is as tax efficient as possible, we are here to help.

We are happy to advise on payroll accounting and help you implement employee benefits in a way that benefits both you and your employees. We will also keep an eye on any legislative news and changes. Just get in touch using the form below.