The new year brings a number of amendments, including financial regulations. The Ministry of Finance of the Czech Republic introduced some changes in regards to finance and taxes for the year 2021 that will impact the everyday lives of both citizens and foreign employees. These changes came into effect on January 1, 2021.
The main financial changes in 2021 are;
- Higher net wage
- Abolition of the super-gross wage
- Higher discounts on the taxpayer (an increase of the basic taxpayer relief)
- Higher wages for paramedics, doctors and teachers
- Flat-rate tax for self-employed
- Monetary contributions to meals
- Higher pensions
The higher net wage is a result of the abolition of super-gross wage and the increase of the basic relief on taxpayers.
In recent years, the cancellation of super-gross wage has been a frequently discussed topic. In autumn 2020, the government presented a proposal for changes as part of the tax package. The abolition of the super-gross wage, together with higher basic relief on taxpayers, will result in the increase of net wage in 2021. Therefore, more money will remain in people’s pockets.
The net wage continues to be taxed by 15%, in the case of high net wages by 23% (the border for this wage is 141 764 CZK – 4 times the average gross wage in 2021). The second stated tax will replace the so-called solidarity tax increase.
The increase of basic relief on taxpayers
Thanks to the higher basic relief on taxpayers, employees’ net wage will grow by 3 000 CZK or 6 000 CZK. This growth is based on the government’s approval of the relief amount on 27 840 CZK in 2021 and 30 840 CZK in 2022.
The increase of wages
In 2021, the salaries of health workers and social workers, the salaries of doctors and dentists and the salaries of teachers and other pedagogical workers will increase.
Another financial news is the flat-rate tax which can be applied for by the self-employed with the turnover not exceeding 1 million CZK. The flat-rate tax will enable the self-employed to pay health insurance and social security insurance taxes with only one tax-payment. Moreover, the obligation to file a tax return will be resolved as well.
The advantages and disadvantages of flat-rate tax has been discussed in our previous article. It is therefore upon everyone’s consideration to decide whether or not is the flat-rate tax beneficial. The flat-rate tax for 2021 will be 5 469 CZK.
Meal voucher flat-rate’s revolution
As of 2021, instead of meal vouchers employees can receive money directly. This revolutionary news is a result of the amendment to the income tax. Therefore, employers will be able to provide a contribution in the monetary form, which will be also tax-advantaged. This is in addition to company meals and meal vouchers. The meal voucher flat-rate, liberated from taxes and insurance premiums, will thus be available to employees who have not yet had meal vouchers or company meals.
Employees’ meal allowance will be exempt from taxes and insurance contributions, however regulated by the law statutory amount. It is also important to say that the use of this contribution is voluntary.
The increase of pensions
The pensions are regularly increasing according to the law by two components (inflation and the growth in real wages). In this year, the pension will increase by 60 CZK to 3 550 CK.