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Changes and Updates for 2025



1. Value-Added Tax (VAT)


VAT Registration


New regulations introduce two thresholds for VAT registration, monitored within the calendar year:

  1. If turnover exceeds CZK 2,000,000 at any time during the year from income with a taxable supply in the Czech Republic, the entity becomes a VAT payer from January 1 of the following year. The entity may voluntarily register as a VAT payer the day after exceeding the threshold if the application is submitted within 10 working days. Otherwise, immediate registration will not be possible.

  2. If turnover exceeds CZK 2,536,500 (EUR 100,000), the entity becomes a VAT payer immediately from the day following the threshold exceedance, regardless of the year's end.

  3. VAT payers can now switch to quarterly tax periods if their turnover did not exceed CZK 15 million in the previous year. The switch is voluntary and requires notification to the tax authority. Non-compliance with the conditions will require a return to monthly periods.


Taxation of Liabilities


Unpaid liabilities must be settled no later than the end of the 6th calendar month after the due date. If a liability remains unpaid, the payer must reduce the claimed tax deduction in the period to which the last day of this deadline applies. In the event of a subsequent partial or full payment of the receivable, the payer may reclaim the deducted tax for the paid amount. This applies even if the debtor is no longer a VAT payer.


Deduction Entitlement


The period for claiming VAT deductions will be reduced from 3 years to 2 years. VAT may be claimed from the calendar year following the entitlement's creation. For example, an invoice with a taxable supply date of May 1, 2025, must be claimed by December 31, 2027, at the latest.Starting in 2027, the restriction on the maximum deduction for M1-category personal vehicles will be removed.


VAT Base and Adjustment


The VAT base for advances may now be adjusted within 3 years, while for invoices (tax documents), the period is 7 years, ending on the last day of the respective year. Complaints beyond this period will no longer allow retroactive base adjustments.The period for adjusting the VAT base for irrecoverable receivables will be reduced from 2 years to 1 year.A simplified procedure has been introduced for lower-value receivables. A corrective tax document can be issued to reduce the originally paid tax if:

  • The debtor has been reminded twice in writing,

  • The receivable does not exceed CZK 10,000, including VAT,

  • The receivable is at least 6 months past due,

  • The total receivables from a single debtor do not exceed CZK 20,000, including VAT, per calendar year.


    The debtor must also adjust their side. If they have already claimed VAT, they must return the amount unless payment is made within 6 months.


Real Estate


Definitions of "Housing Construction" and "Social Housing Construction" have been clarified.From July 1, 2025, a reduced VAT rate of 12% will apply to:

  • Work on completed housing or social housing constructions, provided no new building results from the reconstruction,

  • Construction of buildings intended for social housing,

  • Delivery (including unfinished) of buildings for social housing,

  • Delivery of land with no other buildings except those for social housing,

  • Delivery of building rights with no other buildings except those for social housing,

  • Delivery of units that include no space other than residential space for social housing.


    For other completed buildings, a proportional VAT rate may apply based on the ratio of floor areas.nčené stavbě bude možné použít obdobné sazby dle poměru podlahových ploch.


Other VAT Law Changes


Greater emphasis is placed on specific tax obligations in cultural, artistic, sports, scientific, educational, and entertainment services. With the rise of online events and virtual participation, careful monitoring of the supply location, including the legal entity’s registered office or service provider’s residence, is essential.


New legislation exempts retraining or vocational training in accordance with EU regulations under § 57 of the VAT Act, provided specific conditions are met: the provider must be accredited, activities must comply with legal regulations, and the educational institution must be registered with the Ministry of Education. For example, this exemption applies to one-year language courses with daily instruction and preparatory courses for standardized language exams.


From January 1, 2025, financial service exemptions will be narrowed.Another change introduces an exemption with a right to deduct for book and leaflet deliveries, effective January 1, 2025, with new conditions for applying the exemption.


2. Corporate Income Tax


Stále je umožněna daňová uznatelnost darů ve výši 30 %. Kvůli pokračujícímu konfliktu na Ukrajině se předpokládá, že protiinvazivní zákon bude schválen na delší dobu.

Navýšení sazby daně z příjmů z 19 % na 21 %. Tato změna se poprvé promítne do daňového přiznání za rok 2024.


Zaměstnanci


The tax-deductibility of donations remains at 30%. Due to the ongoing conflict in Ukraine, the anti-invasion law is expected to be extended.The corporate income tax rate will increase from 19% to 21%, first reflected in tax returns for 2024.


Employees


Increase in domestic meal allowance rates for 2025:

  • Meal allowance for 5–12 hours: CZK 148 to CZK 177 (compared to CZK 140 to CZK 166 in 2024).

  • Meal allowance for 12–18 hours: CZK 225 to CZK 271 (compared to CZK 212 to CZK 256 in 2024).

  • Meal allowance for over 18 hours: CZK 353 to CZK 422 (compared to CZK 333 to CZK 398 in 2024).

    The maximum meal allowance for work lasting 5–12 hours is set at CZK 177 in 2025. This amount also determines the maximum tax-free employer contribution for meal allowances, which will be CZK 123.90 per shift in 2025 (compared to CZK 116.20 in 2024).


    The basic compensation rate for driving a personal car will increase to CZK 5.80/km in 2025 (from CZK 5.60/km in 2024)..


Fuel prices according to Section 158(3) of the Labor Code:

  • Gasoline 95: CZK 35.80/l (compared to CZK 38.20/l in 2024).

  • Gasoline 98: CZK 40.50/l (compared to CZK 42.60/l in 2024).

  • Diesel: CZK 34.70/l (compared to CZK 38.70/l in 2024).

  • Electricity: CZK 7.70/kWh (same rate as in 2024).


Changes in employer-provided employee benefit limits:

  • From January 1, 2025, non-cash benefits in the form of goods or services for health, medical, hygiene, or similar purposes from medical facilities or the purchase of medical devices on prescription will be tax-exempt for employees up to CZK 46,557 per year.

  • Additionally, other selected non-cash benefits will be tax-exempt for employees up to half of the average wage, amounting to CZK 23,278.50 per year.


3. Personal Income Tax


he rules regarding the exemption of income from securities (CP) have been adjusted. The current rules state:

  • If total gross income from the sale of CP exceeds CZK 100,000, the so-called holding period must be monitored, which is 3 years for holding the security.


From January 1, 2025, a new cumulative exemption limit of CZK 40 million will be introduced. This limit will apply to:

  • Securities held for more than 3 years,

  • Shares in business corporations held for more than 5 years,

  • Crypto-assets held for more than 3 years.


Income that meets the holding period conditions will count toward this new limit. If the income exceeds the limit, the amount above it will be subject to taxation.Additionally, it is important to remember the reporting obligation if income exempt under the holding period test exceeds CZK 5 million.


For securities and shares acquired by December 31, 2024, a special rule for acquisition cost will be available. Taxpayers can choose between using the acquisition cost or the market value as of December 31, 2024, as an expense.


On December 6, 2024, the Chamber of Deputies approved the exemption of income from crypto-assets under the same conditions as securities. After completing the legislative process, crypto-assets will also be subject to the annual limit of CZK 100,000, the 3-year holding period, and the cumulative limit of CZK 40 million.


Tax Deductions for Personal Income Tax


From January 1, 2024, the "nursery fee" tax deduction (up to the minimum wage, CZK 17,300 in 2023) and the student deduction (CZK 4,020 in 2023) have been completely abolished.

The spouse deduction has been partially restricted.


The spouse must meet the following conditions: an annual income not exceeding CZK 68,000, cohabitation with the taxpayer, and a dependent child under 3 years old. If these conditions are met, the deduction is CZK 24,840.


From July 1, 2024, adjustments to deductions for pension savings and supplementary savings come into effect. Before this date, a deduction of CZK 1,000 is allowed, but afterward, the amount will decrease by CZK 1,700.


For the progressive tax rate of 23%, the income threshold will increase to CZK 1,676,052 in 2025. Any taxable income exceeding this threshold will be taxed at the higher rate.

 

4. Changes to Agreements on Work Performance (DPP) and Agreements on Work Activity (DPČ)


Obligation to Report DPP Workers


Effective July 1, 2024, a new obligation will require employers to report workers employed under Agreements on Work Performance (DPP). Employers must report these workers to the Czech Social Security Administration (ČSSZ) on a monthly basis.


Importantly, this obligation does not involve addressing the number of agreements concluded or contributions to social and health insurance. Employers will focus solely on regular monthly reporting of DPP workers without the need to consider additional administrative requirements related to contributions. This should simplify the process of monitoring and recording these employment relationships.


Income Thresholds for DPP and DPČ


The income threshold for DPP is currently set at CZK 11,499. If a worker's income under DPP reaches CZK 11,500 or more, social and health insurance contributions become mandatory. This threshold may be increased in future years.


For DPČ, the income threshold is set at CZK 4,499. If income reaches CZK 4,500 or more, contributions to social and health insurance also become mandatory. These limits are critical for both employers and employees, as they determine the obligation to pay insurance contributions once specific income levels are reached.


5. Summary Information for Self-Employed Persons (OSVČ)


Sickness insurance is voluntary for self-employed persons (OSVČ), with the minimum advance payment for 2025 set at CZK 243. The maximum assessment base for social insurance is set at CZK 2,234,736.


Social Insurance for OSVČ


From 2025, changes to social insurance for OSVČ will come into effect.

  • The minimum advance payment for main activities will increase to CZK 4,759 (up from CZK 3,852 in 2024).

  • For secondary activities, the minimum advance payment will rise to CZK 1,496 (from CZK 1,413 in 2024).


New entrepreneurs will be allowed to pay lower advances, specifically CZK 3,399 per month, during their first year of business and the subsequent two years. Existing entrepreneurs will only see an increase in advance payments after submitting their report for 2024.


The 2025 income threshold below which OSVČ with secondary activities are not required to pay social insurance is set at CZK 111,736.


Health Insurance for OSVČ


  • The minimum monthly advance payment for OSVČ with main activities in 2025 is CZK 3,143 (up from CZK 2,968 in 2024).

  • No minimum advance payment is set for secondary activities.


Individuals without taxable income (OBZP) will pay CZK 2,808, an increase from CZK 2,552 in 2024.


Flat-Rate Regime


In 2025, the flat-rate tax will change only for the first band:

  • The flat-rate tax for Band I will increase to CZK 8,716 per month (from CZK 7,498 in 2024).

  • The advance payments for Band II remain at CZK 16,745, and for Band III at CZK 27,139.


We can assist you too!


Do any of these changes directly affect you? You don't have to handle the implementation of new obligations alone! Contact us or book your appointment online to find out how we can help you!

 

 

 

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