Proposed changes to personal income tax

An amendment to the Investment Companies Act - EU is being discussed in the Chamber of Deputies. Amendments to this amendment also propose changes to certain provisions in the area of personal income tax. These respond in particular to certain interpretative ambiguities or apparently undesirable effects brought about by changes to the tax laws from 2024. Below we provide a brief overview of the proposed changes. However, it is necessary to wait for the final text of this amendment.
Exemption of the meal allowance for former employees - pensioners
The consolidation package brought about the unification of the conditions for the exemption of the employer's contribution to meals. Both monetary and non-monetary contributions are exempt up to CZK 116.20 per shift, and are conditional, among other things, on the performance of work for at least 3 hours per shift or calendar day. This eliminates the possibility of exempting meal allowances in a situation where employers allow former employees, pensioners, to visit their company canteens. The amendment should, under certain conditions, allow the exemption of income in the form of a reduced price for meals in the employer's canteen for former employees, pensioners, retroactively from 1 January 2024.
Value of in-kind income in the form of an employer contribution to the use of early childhood care facilities at the level of "state" facilities
In connection with the introduction of a limit on the exemption of certain non-monetary benefits of half of the average wage, the legislators propose an alternative method of valuation of the employee's income in the form of an employer's contribution to the use of pre-school childcare facilities. This should now be valued at the usual price in place and time for the use of a preschool established by the state, a county, a municipality or a voluntary association of municipalities, or the highest monthly payment for preschool education according to the ordinance regulating preschool education, taking into account the actual time of use of the facility. The employer may choose whether to value the employee's income derived from the employee's contribution to the use of preschool facilities using this new method or to use the normal price. This income valuation alternative should be available retroactively from 1 January 2024.
Exemption of non-cash income from employee participation in an event organised by the employer
Due to the introduction of the exemption limitation for "leisure" benefits and non-cash contributions for meals, the consolidation package introduced a new exemption for the employee's income from the participation of the employee or his/her family member in a sports or cultural event organized by the employer for a limited number of participants. In order to refine the text of the law in line with the legislator's original intent, where this exemption was intended to be directed at, for example, Christmas parties or company anniversary celebrations, the amendment should bring a modification to the text of the law in the form of an exemption for non-monetary income of an employee or his family member from participation in a social event, including one with a cultural or sporting element. In practice, however, there is no change in the interpretation of the application of this provision.
Relaxation of the condition of exemption of income from the sale of immovable property used for own residential purposes
If a natural person sells a family house or a unit in which he or she has resided for less than two years immediately before the sale, or in which he or she has not resided (for immovable property acquired from 1 January 2021), but uses the proceeds to provide for his or her own housing needs, the income from the sale of such immovable property is exempt. However, this exemption is conditional on the taxpayer filing a notice with the tax authorities by the end of the tax return filing period for the tax year in which the acquisition took place. The legislator proposes to relax this rather strict formal condition for exemption. Notification will remain mandatory, but if the individual fails to do so, he or she will still be able to benefit from the income exemption. This change should be applicable to funds received as early as 1 January 2023. If an individual fails to comply with the notification obligation, he or she will not lose the right to the income exemption but will be subject to a non-monetary penalty.