Income Tax Cuts To Put More Money In The Pockets of Employees From February
From February, most employees will be receiving CZK 1,000 to 3,000 more per month, due to a reform to the calculation of income taxes which abolishes the “super-gross wage”. High earners will see even higher monthly increases. Photo credit: Freepik / Illustrative Photo.
Czech Rep., Jan 25 (BD) – A long-discussed reform to the Czech tax system has now been finalised, meaning that, from February, most employees will be receiving several thousands crowns more in their monthly pay packets.
This is due to the abolition of the “super-gross wage”, which saw employees paying income tax on the combined total of their gross wage plus employer’s contributions to health and social insurance. Now employees will pay a tax rate of 15 percent on their gross wage alone.
For a gross salary of CZK 30,000, income tax was CZK 3,960 in 2020, whereas in 2021 it will be only CZK 2,180, as tax expert Gabriela Ivanco of Mazars told Novinky.cz. Most employees will therefore see between CZK 1,000 and 3,000 extra per month. A higher tax rate of 23 percent will be paid on income exceeding four times the average wage, set at CZK 141,764 per month this year.
The changes are due to affect around 4 million people. Employees are also entitled to tax rebates deducted from the monthly income tax. Further tax reforms have increased the monthly tax rebate per taxpayer by CZK 250 to CZK 2,320, or CZK 27,840 over the whole year, rising to CZK 30,840 in 2022. Self-employed people calculate their personal income tax from the tax base. Although this is not changing, they will also benefit from the CZK 3,000 increase in the rebate.