Updated 28.12.2023

Corporation tax rate increase to 21%

Probably the biggest change is the increase in the corporate income tax rate to 21 %. Income for 2023 will still be taxed at the existing 19% rate in the spring. 

Lower threshold for the 23% personal income tax rate

The basic income tax rate remains 15%, with a second band of 23% (formerly the solidarity tax). The change concerns the threshold above which income is taxed at 23%. Until now, this has been 4 times the annual average wage (CZK 1,935,552 for 2023). The threshold for higher taxation will now fall to just 3 times the annual average wage. For 2024, this threshold will be CZK 1,582,812. 

Abolition or restriction of certain income tax credits
  • abolished – student tax credit – until 2023, secondary school and university students could claim a credit of CZK 4,020
  • abolished – preschool fee tax credit – until 2023, parents could claim a credit of up to CZK 17,300
  • restricted – spouse tax credit – a new condition requires the spouse to care for a child under 3, while the condition that your partner may earn no more than CZK 68,000 a year remains (maternity benefit counts towards the limit; parental allowance does not)
Company cars

Another limit frequently mentioned in the media is CZK 2 million for company passenger cars. Of course, nobody is banning you from buying a more expensive car. The restrictions concern depreciation limits and, for VAT payers, a limit on the input VAT deduction on purchase. In practice, your depreciation will be calculated on only CZK 2 million, even if the purchase price excluding VAT is, say, CZK 3 million. A similar rule will apply to VAT payers. The maximum VAT deduction on a car purchase will be CZK 420,000. The unclaimed portion will be a non-deductible cost.

Other changes

The option to claim a tax deduction for still wine given to clients, even within the CZK 500-per-gift limit, is also being abolished. It will now be a non-deductible business entertainment expense. So hurry up and give those gifts this year. 🙂 

The government will also restrict exemptions for raffle and gambling winnings, which are currently tax-free up to CZK 1 million. From 2024, this limit will fall to CZK 50,000.

Finally, I would like to remind you that these changes only apply from 2024. They will therefore not yet affect your 2023 return filed in spring 2024. 🙂

The fiscal consolidation package includes other significant changes that may interest you, such as changes to VAT or the rules for employing agreement workers, which you can read about in other blog articles. If you are unsure how these changes will affect you, please get in touch. Together, we will work out what you need to watch out for. 🙂