Tax Legislation Changes
Increase of the Children Tax Discounts
There is an amendment of the Social Support Act having impact for families with more children in the approval process. Its subject is to increase the tax discount for the second child from current CZK 19,404 per year to CZK 22,320 (CZK 1,860 per month) and also to increase the tax discount for the third and other child from current CZK 24,204 to CZK 27,840 (CZK 2,320 per month). These changes shall be valid retrospectively for the full year 2021. The increased tax discount can be claimed within the 2021 annual tax reconciliation or the 2021 personal income tax return.
Tax Bonus Limit Cancelation
The amendment further solves the monthly limit of the tax bonus provided by the employer which was, up to now, CZK 5,025. This shall correct an error in the „Tax Package“ where the limitation has been cancelled in the annual amount, however not monthly.
Effective January 2021, the employers can provide to its employees a monetary meal contribution as one of the alternatives of the meal support. Subsequently, there arose various queries in the legislative interpretation, especially the question whether the contribution can be paid (including the deductions release) also to the statutory representatives working based on the Contract on Representation Performance. Based on the new interpretation of the General Tax Directorate, there has been specified, that this benefit is acceptable in case the Contract specifies a length of one shift and the attendance of the Statutory Representative is recorded. Within the same interpretation, there has been further confirmed that the combination of various methods of the meal support to one employee is not acceptable. Therefore, the company cannot pay to the same employee the meal contribution and provide the meal vouchers at the same time. However, it is possible if the employer provides both types of benefit and each of the employees uses one option.
Actual Status of the Measures Related to COVID-19 with Payroll Impact
With respect to the general improvement of the situation related to COVID-19 and running release of the measures, the situation is again getting back to normal. Also, the legislation which related to compensation programmes and various benefits for employers or employees are being changed accordingly.
Herewith you can see the recapitulation of the main changes:
Obligatory COVID-19 Testing by Employers
Effective July 1, 2021, the employers are no more obliged to test their employees. The last compensation from the health insurance authorities can be claimed for June 2021.
Extraordinary Contribution within Quarantine („Isolation Pay“)
Effective June 30, 2021, the entitlement to extraordinary contribution within quarantine ends. The contribution was for those employees who were instructed to be in quarantine or employees in isolation based on the Public Health Act. The amount of CZK 370/day (however maximum of 90 % of the average income) is being automatically compensated by deducting the social security payment of the employer. Initially, the Isolation Pay was planned for the period of March - April 2021, however, it has been extended by another two months. The contribution can by claimed for June 2021 at the latest.
The Antivirus regimes of the Ministry of Work and Labour Affairs, which has been in place for more than one year, has been closed as at May 31, 2021. The only exception is the Regime A, which has been extended by one month for those employees who are in quarantine or isolation in connection with COVID-19. The last contribution can be claimed within July 2021.
Child Care Support
In accordance with actual measures of the Ministry of Health, all schools, nursery schools and other children institutions are open now. Therefore, there is no general entitlement to the Crisis Child Care Support however can be claimed for various specific reasons, such is in case of positive COVID-19 test of any of the children. Further, the school attendance is not obligatory for children having medium or high mental or other handicap which disables to pass the preventive COVID-19 testing. This must be proved by the doctor confirmation.
After months of negotiations, the amendment on Employment Act, so called Kurzarbeit (contribution for limited work), i.e. the legislation about support of the employers in the serious economic troubles, has been approved. As a result of that, the Czech Republic should be legislatively ready to deal with any critical situation in the future and contribute the employers for the salaries compensations. This should help the companies to keep the job vacancies.
The concept is similar with current Antivirus regimes, however, Kurzarbeit is the system tool which can support the employers in various situations, such as economic recession or natural events.
Based on this change, the employers shall be obliged to pay (during the Kurzarbeit period) a salary of 80 % of average income and 80 % of the amount (including social and health insurance), however no more that 1.5 of average salary, shall be compensated.
The companies using Kurzarbeit are not allowed in the respective and following year to dividends payment.
The Kurzarbeit is prepared for the future critical situations. In case the need of any other compensations in related to current pandemic situation arise, the Antivirus regimes can be used until the end of the year 2021.
Time-off for Performance of Holiday Camps and Sport Training Camps for Children
With coming Summer, we would like to bring to your attention new legislation related to salary compensation to the employees who act as the staff of Summer holiday camps or sport training camps for children. In accordance with the Labour Code, the employer is entitled to time-off for this kind of activities in the necessary extent, however no more than 3 weeks, under the assumption that it does not seriously affect an operation of the employer. It is newly possible to provide up to one week off with salary compensation in the amount of average hourly salary. The employer can apply for payment of this salary compensation by submission of the application with the local Social Security Authority. The entitlement to this compensation is applicable only in case the event is organised by the legal entity registered with the public register for minimum of five year and a work with children is its main activity. At the same time, the employee must continuously perform the work with children for this entity for free for the minimum period of one year.
Changes in Legally Instructed Debts Legislation
On July 1, 2021, two changes with partial impact to payroll,come into effect:
It is a new type of social contribution by which the government shall support the single parents and their children in case the second parent does not pay the obligatory maintenance. The maximum amount of the contribution is CZK 3,000 per month and withdrawal is possible up to the period of 24 months. The state will then claim the substitute maintenance from the debtor and a privileged legally instructed debt.
Protected Bank Account
The protected bank account shall prevent the current problems of the employees having the legally instructed debts. The employer sends the undeductible amount to the bank account of the employee, however also the bank account may be a subject of the legally instructed debt collection. In such a case the employee has very limited options to get to the funds he/she is entitled to. Therefore, the debtor newly has a possibility to open on protected bank account where can be filed those funds which are not subject of the debt collection. The debtor must inform the employer about opening such an account. If required by the employee or the executor, the employer is obliged to issue a confirmation (on special form) that only the funds which are not subject of the deductions are being sent to this account.
Other Expected Changes in Payroll
Minimum Salary Increase
The significant increase of the minimum salary for the year 2022 by almost 20%, to the amount of CZK 18,000, is currently very actual and discussed topic. The government expects that this shall help to renew the economic and motivate the employees with lower salaries. This should also help to reach a minimum salary similar with other European countries. There is also discussed another increase by CZK 2,000 for the year 2023, ie. to the amount of CZK 20,000.
Expected Changes of Conditions in Paternal Leave and Long-Term Family Member Care
There has been discussed an amendment of the Act on Sickness Insurance in the first reading of Chamber of Deputies. Its subject is to change conditions of the paternal leave and long-term family member care. In case of paternal leave, the period for withdrawal shall be extended from current six weeks from the birth date in case the child is hospitalised within this six-week period. As regards the long-term family member care, it is newly proposed to shorten the condition of hospitalisation from current 7 days to 4. It is also discussed to set up a possibility to apply for the Resolution on the Need of Long-Term Care within the period of 15 days from the hospitalisation. As a result of that the contribution shall be reachable for wider extent ofpersons. It is also considered to extend the scope of family members who may beentitled to this kind of contribution.