What Changes for Employees, Freelancers, and Employers? Taxes in 2017

Employees in the Czech Republic can expect new, more beneficial, pro-family personal tax allowances in 2017.

The most important change that concerns employees, freelancers, and employers is the raise of minimum wage from CZK 9.900 to CZK 11.000. For freelancers, this change brings growth of tax advances for health insurance and social security contributions.

The minimum wage is supposed to reach 40% of the average wage that has been set to CZK 28.232 for 2017. The minimum wage and average wage levels change the mandatory amount of social security contributions and health insurance of employees, employers, and freelancers as well. More about Czech income tax calculation here.

Students and “part-time jobbers”

The minimum hourly income rises from CZK 58.70 in 2016 to CZK 66.00 in 2017. Working with “Agreement to Complete a Job” [Czech: Dohoda o provedení práce] guarantees that within the first 300 hours of work in 2017 and salary up to CZK 10.000 an employee is not obliged to fill in taxes and doesn’t pay any social security contributions or health insurance.

Changes for employees in 2017

In January 2017, the minimum wage for full-time employees goes up from CZK 9.900 to CZK 11.000. CZK 1.100 difference is the highest raise of minimum wage in the Czech history. Employees in the Czech Republic can expect new, more beneficial personal tax allowances in 2017.

The changes in personal tax allowances in the Czech Republic in 2017

Child tax credit (provided child qualifies as a dependent living with taxpayer)

  • 1st child: allowance stays at CZK 13.404 (monthly CZK 1.117).
  • 2nd child: allowance rises from CZK 15.804 to CZK 19.404 (+ CZK 200 each month).
  • 3rd and other children: from CZK 17.004 to CZK 24.204 in 2017 (+ CZK 300 each month).

Kindergarten tax allowance

“Kindergarten tax allowance” yearly limit changes to match the level of minimum wage from CZK 9.900 to CZK 11.000. One of the parents can deduct this money from his or her 2017 income tax with a confirmation of attendance of their kindergarten.

Limit for a tax bonus

In 2017, the limit for obtaining a so-called tax bonus (situation when the tax allowances are higher than the actual tax duty) rises from CZK 59.400 per year in 2016 to CZK 66.000 CZK in 2017. Newly the tax bonus comprises only income from employment or entrepreneurial activities. In 2016, it was possible to apply the tax bonus to incomes from, for example, renting or investing.

Limit for deduction of pension contributions and health insurance

Another good news – the limit for deduction of pension contributions and health insurance from the tax base has been doubled in 2017 from CZK 12.000 in 2016 to CZK 24.000 in 2017 making saving for future years more beneficial. If people save at minimum CZK 3.000 / month, they can obtain a pension contribution from the Czech state up to CZK 6.360.

New tax form

For the first time in the Czech history, full-time employees will get a chance to fill in a simplified tax form of 2 pages A4. All the others and employees who have more than one income will need to submit the old 4-pages tax form with attachments.

What changes for freelancers in the Czech Republic in 2017?

From January 2017, all people their main income comes from freelancing (doesn’t concern: students, mothers / fathers on maternity leave, and retirees) will pay higher monthly tax advances – the tax advances for social security contributions rise from CZK 1.972 to CZK 2.061 by 89 crowns. In case of health insurance, the tax advances change from CZK 1.823 to CZK 1.906 in 2017.

EET – Electronic record of sales in the Czech Republic

Every natural person (as an opposite to a legal person = company) will be entitled to deduct costs regarding acquisition of technology for electronic recording of sales to the limit of CZK 5.000 from their taxes. This tax allowance is however limited by the positive difference between 15% of partial tax base and personal tax allowance; to put it simply, a natural person must perform a certain income to be entitled to deduct the EET allowance.

The second phase of EET launches in March and concerns the businesses that accept payments in cash or by credit cards. Ministry of Finance is currently considering an exception for e-shops.

The unemployed

Those who are unemployed and are not officially registered at employment agency or students older than 26 years pay obligatory health insurance CZK 1.485 each month in 2017.

Newly, the unemployed can earn more money and keep their jobseeker’s allowance. The condition is that a monthly income of a jobseeker mustn’t reach CZK 5.500.

Sources:
HN, 2017: Daňové změny v roce 2017: Vyšší slevy pro rodiče, výhodnější spoření i přísnější bonus at: http://byznys.ihned.cz/c1-65569270-danove-zmeny-v-roce-2017-vyssi-slevy-pro-rodice-vyhodnejsi-sporeni-i-prisnejsi-bonus.
JobSpin.cz, 2016: Income Tax and Tax Deductions in the Czech Republic at: https://www.jobspin.cz/2016/04/income-tax-and-tax-deductions-in-the-czech-republic/.
Jdiparcovat.cz, 2017: Jaké změny čekají zaměstnance a podnikatele v roce 2017 at: http://www.jdipracovat.cz/rady/personalni-rady/jake-zmeny-cekaji-zamestnance-a-podnikatele-v-roce.
Ucetni Portal, 2017: Daňový slovník at: http://www.ucetni-portal.cz/tax-deduction-on-spouse-without-income-284-c.html.
Ucetni Portal, 2017: Tax deduction on spouse without income at: http://www.ucetni-portal.cz/tax-deduction-on-spouse-without-income-284-c.html.
Zpravy Aktualne, 2017: Daňové změny 2017: Vyšší slevy pro rodiče, výhodnější spoření i přísnější bonus at: https://zpravy.aktualne.cz/finance/danove-zmeny-2017-danove-priznani/r~fef6b7b6c91c11e6a8cb002590604f2e/?redirected=1484045397.

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