What's new in 2022 for personal income taxpayers? Here is an overview of the most important changes:
Personal income tax rates
First of all, we would like to remind you of the major changes that, although already in force from the beginning of 2021, will apply for the first time in returns filed in 2022 for 2021.
As of 2021, the solidarity tax increase has been abolished and progressive tax rates of 15% and 23% have been introduced. Here, it is important to highlight the fundamental difference between the solidarity tax, which applied exclusively to earned income and the self-employment tax base (i.e. a flat 15% rate on all other income), and the progressive tax rates, which apply to all types of income. As a result, this means that income such as income from the sale of securities, business shares, immovable property or gifts – if the exemption does not apply – or income from cryptocurrencies, for example, will be affected by the higher tax rate. The tax base threshold for applying the 23% tax rate is CZK 1,701,168 for 2021 and CZK 1,867,728 for 2022.
As of 1 January 2021, the concept of super gross wages has been abolished, i.e. there is no longer an increase in the employment tax base by compulsory employer contributions. This is a change reflected by employers in wages, and so most taxpayers will most likely have noticed only a slight increase in net pay.
Increase in the discount per taxpayer
From 2022, the basic taxpayer discount, which was already approved by the Senate in the 2021 tax package, will be further increased from the original CZK 27,840 (CZK 24,840 for 2020) by a further CZK 3,000 to CZK 30,840 for 2022. This will therefore mean a slight increase in net income in the form of a lower tax liability.
In the case of families where the other spouse has limited income of his/her own, we recommend using the difference between the second spouse's allowance (unchanged amount of CZK 24,840) and the new amount of the taxpayer's allowance – this can be done by showing the income from common property or redistributing part of the business income in the second spouse's tax return. If this income is sufficient, the taxpayers may receive an additional CZK 3,000 for 2021 and CZK 6,000 for 2022 against the application of the second spouse's allowance.
Another change is an increase in the taxpayer's advance payment in the flat-rate regime, which will be CZK 5,994 per month. Lump-sum advances will increase by CZK 525 compared to 2021 due to the increase in social security and health insurance compared to 2021, which are linked to the minimum assessment bases for these insurances. Despite this increase, lump-sum advances are still advantageous for selected smaller entrepreneurs compared to the normal regime (e.g. applying expenses as a % of income in the case of a 40% expense lump sum).
The conditions for entering the flat-rate tax have not changed from 2021. It is possible to re-enter the flat rate scheme for 2022 until Monday 10 January 2022.
Taxpayers who entered the flat-rate scheme last year are advised to examine the circumstances relevant to remaining in the scheme and claiming the scheme on their tax return. For example, if they have started to receive rental income, sold their immovable property, securities etc., it is possible that the flat tax scheme for 2021 will not be applicable after all.
Child tax credit
It is worth mentioning the increase in the tax benefit for children, which came into force in the second half of 2021 with retrospective effect from 1 January 2021. The amount for the first child remained unchanged, for the second child it increased by CZK 2,916 to CZK 22,320 and for the third and each subsequent child the amount increased by CZK 3,636 to CZK 27,840 per year.
For employees, the increase in the benefit can only be taken into account in the 2021 annual tax return or when filing a tax return. If taxpayers are not required to file a tax return, we recommend that they request an annual tax return from their employer to take advantage of the increased benefit amount.
Furthermore, from 2022 onwards, there will no longer be a cap on the maximum monthly amount of the tax bonus (the portion of the tax credit in excess of the actual tax calculated). During 2021, an employee could be paid a maximum monthly tax bonus of CZK 5,025.