Abolition of the limit for exemption of income from the sale of securities and business shares
One of the key Senate amendments is the reintroduction of the 40 million limit on exempt income when the time test for holding securities (3 years) and business shares (5 years) is met, effective from 1 January 2026. The limit would therefore only apply to income of this type realised (received) in 2025.
The CZK 40 million limit should remain in place only for income from the sale of crypto assets held for at least 3 years.
Qualified employee options
We have provided detailed information about the new tax regime for employee share and option plans here. Compared to the article, the latest date for deferred taxation is to be extended from 10 to 15 years. Furthermore, it is proposed to abolish the change of tax residency as the date for deferred taxation, as this caused interpretation problems in practice.
In the already rather confusing system of taxation of employee shares, recent changes have added a third tax regime targeting so-called qualified employers (primarily start-ups). The key change is that income from the exercise of qualified employee options will no longer be considered income from dependent activity, but rather other income. Essentially, this means that such income will not be subject to social security and health insurance contributions.
The regime could be used if specific conditions are met, such as the size of the employer or group (turnover and assets), the maximum amount of the employee's share and the minimum amount of regular remuneration, the length of dependent activity before the promise is granted, or the minimum length of the period after which the option can be exercised.
Abolition of withholding tax on income from dependent activity and its impact
It is still the case that from 1 January 2026, withholding tax on the income of members of legal entities (e.g. executives) who are tax non-residents should be abolished. They will thus be subject to progressive taxation in the same way as Czech executives.
If, in total for the tax period, they exceed the limit for progressive taxation, foreign executives who are tax non-residents will be required to file a tax return in the Czech Republic (until now, they had the option of filing a return if they voluntarily decided to do so and were EU/EEA residents).
Despite the opposition's efforts, the abolition of withholding tax on small earnings (agreements on work performed up to CZK 11,500 per month and other forms of employment relationships up to CZK 4,500 per month) from 1 January 2027 also remains in place.
However, in response to public demand, the amended version of the amendment introduces a new feature whereby small earnings newly taxed by advance tax will not automatically give rise to an obligation to file a tax return. As a result, the regime will be quite similar to the current practice for individuals with small employment earnings, including the possibility of including these small earnings in their tax returns.
Similarly, minor employment earnings within the given limits will not be considered a violation of the conditions for flat-rate tax and will therefore not result in entrepreneurs being required to file a tax return (the taxpayer's tax under the flat-rate regime will be equal to the flat-rate tax).
New definition of a low-emission vehicle for the purposes of employee benefit taxation
If an employer allows the use of a motor vehicle provided by them for private purposes, the employee receives non-monetary taxable income. This is calculated as a certain percentage of the purchase price of the vehicle, including VAT. For so-called low-emission vehicles, this is 0.5% per month.
From 1 January 2026, the definition of a low-emission vehicle should be amended, with only the vehicle category (M1, M2, N1) and the emission limit, which must not exceed 50 g/km, being tested. Compliance with the 80% emission limit criterion under European Union regulations will therefore no longer be examined.
Clarification of the application of the exemption for "leisure" benefits
It is proposed to specify the use of income exemptions in the form of employee benefits such as admission to sports facilities, cultural events and performances, use of healthcare facilities or similarly usable points on benefit cards only for benefits beyond the scope of wages for work. The proposed amendment responds to the rulings of the Supreme Administrative Court and aims to prevent practices where employers transferred part of the salary for work to the category of benefits (so-called salary swap), thereby essentially achieving exemption of wages in kind.
We will monitor further legislative developments for you.