Basic overview of tax changes effective from 1 January 2024

With the beginning of 2024, there are many changes to the tax legislation. Although these changes will not be reflected in tax returns filed for 2023, it is undoubtedly a good idea to familiarize yourself with them in advance and consider your options for tax optimization during 2024. The aim of this text is therefore to present some of the key changes that we are likely to encounter in 2024. 


Real estate tax


The first changes that may affect our obligation to file a tax return concern the real estate tax, with the deadline for filing a tax return for 2024 coming on 31 January 2024. However, this obligation only applies to persons who acquired ownership of real estate in 2023 or if one of the other conditions is met. 


Typically, these would be situations where a person obtains a building permit or is already constructing a building on land where another building already stands. In such a case, there is an obligation to file a tax return and tax the land to the extent of the future building at the higher rate for building sites. Now it is no longer decisive whether there is another building on the same land. 


Another very common case may be the taxation of a garage. Owners of buildings registered in the Cadastre of Real Estate as a garage should check whether they actually declare such a building as a garage. If not, they need to file a tax return and list the property as a garage. The garage cannot be taxed according to its actual use, so it can no longer be declared, for example, as a fruit storage facility (i.e. as an accessory to a residential house), but it must be taxed according to how it is registered in the Cadastre of Real Estate. 


This is also applicable in reverse. The owner of a garage which is not so listed in the Cadastre of Real Estate should check whether he declares it as other taxable building. If not, he will have to file a tax return. Such a building can no longer be declared as a garage if it is not listed as a garage in the Cadastre of Real Estate. Nothing changes for garages not registered in the Cadastre of Real Estate.


As for the tax rates on land, buildings and units themselves, these are raised by an average of 80 %. However, the amount of the tax itself will vary from municipality to municipality, not only with regard to the size of the property, but also with regard to the size of the municipality and the local coefficient. Since this year, an inflation coefficient has also been introduced, which is used to multiply the resulting tax on land and the resulting tax on buildings and units. For this year, the coefficient is set at 1 and its rate for 2025 will be announced by the Ministry of Finance by notification in the Collection of Laws and International Treaties by 30 June 2024.


Personal income tax


As of the new year, the average wage multiple from which the higher personal income tax rate of 23% applies has been reduced. This multiple has been reduced from 48 times to 36 times as of 2024. The new income threshold is therefore CZK 1 582 812 per year or CZK 131 901 per month. This threshold applies to both employees and self-employed persons, with the higher tax rate applying only to the portion of income above the threshold. 


Other significant changes include the abolition of the so-called "nursery fee" (a tax deduction for placing a child in a pre-school institution) and the student tax deduction. The year 2023 is the last year in which the nursery fee can be used up to a maximum of CZK 17,300 per year. In the case of the student discount, the amount is CZK 4,020 per year. In the case of the spouse's tax deduction, a condition has been added whereby the deduction can only be applied for the period when the taxpayer lives in a common household with the spouse and the dependent child, but only until the child reaches the age of 3. The maximum income limit for a dependent spouse remains unchanged at CZK 68,000. 


In addition to the changes in tax deductions, it is also worth mentioning the increase in the limit for the exemption of gratuitous gift income from CZK 15,000 to CZK 50,000 per year and the reduction of the limit for the exemption of lottery or raffle winnings from CZK 1 million to CZK 50,000. The last significant change is the unification of the limit for reducing the tax base for deposits for pension savings and capital life insurance, while it is also possible to apply this deduction to a new instrument for providing security for old age, the so-called long-term investment product. In total, up to CZK 48,000 per year can be deducted from the tax base (the limit is common for all three products).


Changes for employees


There have been several significant changes in the case of income from employment (income from employment, fixed-term and temporary employment). The first change is the reintroduction of the 0.6% sickness insurance contribution on employee wages. There is no change on the employer's side; the employer will continue to pay 2.1% for its employees as hitherto. 


Another significant change is the establishment of a limit of CZK 17,500, up to which the obligation to pay health and social insurance will not apply in the case of concluding an agreement to complete a job (DPP) with several employers. In this context, a register for employers should be launched in the second half of this year, to which employers will have to provide information on the income of their employees with whom they have concluded a DPP. In the case of employees working on a DPP with only one employer, the limit has been increased to CZK 10,500.


There has also been a change in the taxation of employee non-monetary benefits. Starting this year, the amount of employee non-monetary benefits (contributions to sporting and cultural events, use of educational or recreational facilities, etc.) is limited to half of the average wage for 2024, so in 2024, the exemption will only apply up to CZK 21,983. If the employee consumes 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.


Changes for self-employed persons


As in the case of employees, the sickness insurance rate for self-employed persons has also been increased by 0.6%. Therefore, self-employed persons who voluntarily participate in sickness insurance will now have a rate of 2.7%. 


However, the most important changes are the increase in the minimum assessment base for social insurance and the increase in the tax assessment base. The tax assessment base for self-employed persons has risen to 55% of the tax base from this year and should remain at the same level for the following years. 


In contrast, the minimum assessment base for social insurance premiums has risen to 30% of the average wage, and will continue to rise at the same rate in 2025 and 2026, by 5 percentage points per year. Thus, the assessment base for social insurance premiums will be 35% in 2025 and 40% in 2026.


Corporate income tax


In the case of corporate income, we can talk about two significant changes. The first change is the increase in the tax rate from 19% to 21%. 


The second change is the limit of 2 million CZK for the entry price of a vehicle of category M1 (passenger car), which can be reflected in tax deductible costs in the form of depreciation. Any amount exceeding this limit will be accounted for as an expense not affecting the tax base, with the exception of ambulances and funeral vehicles, licensed taxis and cars whose owner provides them as the subject of a finance lease.