Main changes in taxation of employees
In the previous issue of our tax and legal news we have informed you about the most important changes that the approved amendments to the Income Tax Act will bring from 2020 to companies and entrepreneurs. This article is focused on new exemptions of certain types of employment income and simplifications in employers’ obligations introduced by these amendments. All above mentioned amendments to the Income Tax Act have already been published in the Collection of Laws.
1. New exemptions from tax on employment income
- Contribution from employer's social fund to preventive medical examination– the amendment aims to encourage participation in the preventive medical examinations above the mandatory obligations set by law.
- Non-monetary benefits provided to employees up to EUR 500 – this exemption may be applied on any non-monetary benefit, but only if such non-monetary benefit is treated as a tax non-deductible expense on the employer´s side (e.g. parking place, teambuilding events or company parties). The exemption will apply up to a maximum of EUR 500 per year together from all employers. This provision will be effective from 1 January 2022.
- Education benefits- the amendment adjusts the tax exemption of benefits related to the employee´s education. In case of enhancing the education at one of the universities, the exemption could be applied if the employment relationship lasts at least 24 months. As hitherto, the education must be related to employer´s business activity.
- Travel of employees to/from work– the amendment simplifies the existing provision. The tax exemption could be applied up to EUR 60/month per employee. Should the benefit calculated per one seat in a motor vehicle exceed EUR 60, solely the difference is taxable. The amendment reacts to disadvantageous current situation under which the employees must bear costs also for unoccupied seats in the vehicles. This provision is effective from 1 January 2021.
- Accommodation of employees – exempted benefit received from an employer producing in multi-shift operation is increased from current EUR 60 to EUR 100 per month per employee.
2. Simplifications in employer´s obligations
- The amendment allows electronic issuance and delivery of documents based on an agreement concluded between employer and employee (e.g. for the purpose of annual tax settlement, issuance of confirmations etc.). It also defines how the documents must be signed and delivered by the employer and how the delivery must be secured and confirmed.
- Significant simplification will bring abolition of the obligation to sign the annual declaration to apply general allowance and tax bonus. The amendment allows to sign this declaration at the beginning of the employment and then only in case of changes.
- The due date of tax prepayments paid by economic employers (for assigned employees) is specified.
- Simplification in rounding - uniform rounding to two decimal places for all tax calculations will be applied.
3. Other changes in personal income tax
The tax exemption of income from sale of securities after one year from their acquisition will apply only in case that one year lapsed from their admission to the regulated market. The purpose is to avoid speculative admission on the regulated market shortly before the sale.
In addition to the abovementioned changes, the amendments introduce also other changes in taxation of individuals. We have already informed you about the most important changes in the last issue of our tax and legal news, e.g. reduction of tax rate for small entrepreneurs, increase of the personal tax allowance and increase of the limit for tax prepayments.