Tax, accounting and other news for 2025

Tax, accounting and other news for 2025

First of all, we would like to wish you much success in 2025. In line with the motto “fortune favors the prepared”, we would like to summarize here the most important changes in the tax area that will come into effect from 2025. At the same time, we will also return to some other important changes that were adopted earlier and came into effect during 2024.

I. News in income taxes and related areas

1. Changes to work performance agreements

As we have previously informed you, as part of the so-called consolidation package adopted during 2023, an amendment was approved, the aim of which was to tighten the area of ​​social and health insurance contributions for work performance agreements. The planned effectiveness was initially to be from 1 July 2024, but was subsequently postponed to 1 January 2025. In the end, all considered tightenings were cancelled and the assessment of whether insurance contributions will be paid from a work performance agreement will be the same in 2025 as before, with two exceptions:

• the amount of an employee’s monthly income from which the work contract is subject to insurance premiums is increasing. Until now, this amount was CZK 10,000, and from January 1, 2025, it will be calculated as 25% of the average wage rounded down to five hundred crowns. For 2025, it will be CZK 11,500 per month,
• The assessment of the threshold is changing – until now, it was the case that if the employee’s earnings were exactly CZK 10,000 per month, the work performance agreement was not subject to insurance premiums. The new rule is that if the employee earns exactly CZK 11,500 per month on the DPP, insurance premiums will already be paid. In other words, for the work performance agreement to be free of insurance premiums in 2025, the employee’s monthly “countable income” can be a maximum of CZK 11,499.

2. Amendments and additions to the consolidation package, particularly in the area of ​​employee benefits

Last year’s consolidation package brought a number of changes, including in the area of ​​employee benefits. We would like to remind you that from 2024, the assessment of provided meal allowances, so-called leisure benefits, etc. has become stricter. During 2024, some amendments were approved in the legislative process, which (mostly to the benefit of taxpayers) mitigated the changes caused by the consolidation package. These include, for example, the following areas:

• provision of meals to former employees on old-age pension and disability pension for 3rd degree disability: according to the new concept, from 2024, meals provided to employees (up to a certain limit) will be exempt from personal income tax, among other things, on the condition that the employee works at least 3 hours in a given shift. This legal regulation has actually complicated the provision of meals to former employees (old-age and disability pensioners) who logically do not meet the minimum length of service. Therefore, an amendment was adopted with retroactive effect (i.e. also for 2024), according to which meals provided to old-age and disability pensioners (for 3rd degree disability) who retired from a given employer will continue to be exempt from income tax (of course, provided that other conditions are met – in particular its maximum amount),
• the limit for some so-called leisure benefits was increased: the consolidation package significantly affected the provision of so-called leisure benefits (i.e. non-monetary benefits for various purposes – for example, in the form of contributions to sports and cultural events, use of educational or recreational facilities, use of preschool child care facilities, purchase of goods or certain services of a medical nature, etc.) by limiting the exemption of these benefits from personal income tax to an amount equal to one half of the average wage (for 2024, this amount was approximately CZK 22,000). With effect from 2025, a new amendment was approved that favors so-called health benefits, i.e. non-monetary benefits in the form of contributions to the purchase of goods or services of a health, medical, etc. nature from health facilities or the purchase of medical devices on a medical prescription. An example is the provision of so-called premium medical care. This group of benefits will be exempt from tax up to the amount of the (entire) average wage, i.e. up to CZK 46,557 for 2025. For other leisure benefits, the limit of one half of the average wage will continue to be used for their exemption, i.e. CZK 23,278.50 for 2025.

3. Retirement savings products and long-term care insurance

We remind you that from 2024, in addition to private life insurance and supplementary pension insurance, it is possible to apply two new products for tax purposes – a long-term investment product and long-term care insurance. These products have a tax advantage both for the taxpayer, who can deduct the relevant payments (contributions) from his tax base, and for the employer, who contributes to the products for his employees. At the same time, from 2024, the condition of the minimum duration of a newly concluded contract is tightened to 120 months, i.e. 10 years. The adoption of an amendment (favorable for taxpayers) is currently being finalized in the legislative process, according to which the duration of the original product of the same type, which is replaced by the new contract, will be included in the minimum duration of the new product (for example, the conclusion of a new supplementary pension savings contract that replaces the original supplementary pension insurance contract).

4. Extension of tax support for aid to Ukraine and extension of the increased limit for applying donations

The Parliament is finalizing a legislative process that will extend the validity of Act No. 128/2022 Coll. for the years 2024 to 2026, on the basis of which, among other things, donations to aid Ukraine can be tax deductible. This law also includes an increased limit for the use of tax-deductible donations (not only those related to the war in Ukraine) of 30% of the tax base. Individuals and legal entities will therefore be able to use this limit for another three years.

5. Exemption from personal income tax on income from the sale of crypto assets

The legislative process is currently being finalized for the amendment to the Income Tax Act, which will introduce a rule with effect from 2025 that income from the sale of crypto-assets (i.e. in particular cryptocurrencies) will be exempt from personal income tax under similar conditions as for securities. In simple terms, a so-called 3-year time test will be applied to crypto-assets that are not part of the taxpayer’s business assets (i.e. if crypto-assets are sold after three years from acquisition, it will be tax-exempt income – with exceptions, see below). At the same time, if the taxpayer sells crypto-assets within 3 years of their acquisition for an amount of up to CZK 100,000 per calendar year, it will also be exempt income. This is a fundamental change compared to the current situation, where income from the sale of crypto-assets is taxed.

At the same time, the income exemption limit for crypto-assets will be CZK 40 million per tax period, as for securities and shares (see next point). Therefore, if the taxpayer’s annual income from the sale of crypto-assets, securities and shares exceeds CZK 40 million, the income will be exempt from tax only up to this amount.

6. Limitation of exemption from personal income tax for income from the sale of shares and securities

We remind you that a major new feature from 2025 is the limitation of the exemption of income from the transfer (sale) of a share in a commercial corporation or a security for consideration. Such income will (subject to the fulfillment of the standard so-called time tests) be exempt from personal income tax only up to the amount of CZK 40 million in the tax period. This means that if the taxpayer receives income from the sale of a share (for example, in an LLC) or a security (or income from the sale of crypto assets – see the previous point) higher than CZK 40 million in a given calendar year from 1 January 2025, income exceeding this limit will be taxed. However, it will be possible to claim as an expense – as before – the standard acquisition price of the share or security (or part thereof), or Alternatively, it will be possible to apply the market value of these assets as of December 31, 2024. For the purposes of future sale, we therefore recommend that you obtain an expert opinion on the valuation of your share or security. If you are interested, please contact us.

7. News in health insurance

From 2025, the remaining health insurance benefits, especially nursing care and maternity benefits, will be digitized. Employees will no longer have to submit “paper” documents to their employers as they have done so far.

Another change is that self-employed persons and employees working under a work performance agreement will also be entitled to sick pay (both if the conditions are met).

8. Further changes to social security contributions and state employment policy contributions

There are two important changes in the area of ​​social security contributions:

• In connection with the so-called pension reform, a discount on insurance premiums for working old-age pensioners is being introduced from 2025. These pensioners, whether employees or self-employed persons, will have the right to apply a discount on pension insurance premiums of 6.5 pp (i.e. for employees, 100% of their pension insurance rate). If an old-age pensioner applies the discount, his or her net income will increase. We recommend that you inform the affected employees about this fact so that they can apply the discount in time,
• New self-employed persons will no longer have to pay monthly advances on pension insurance premiums for two calendar years starting from the start of their activity. This is a measure only at the “payment level”, in other words, they will not be obliged to pay advances, but they will have a higher additional payment on the premium. We also add that the option not to pay advances does not apply to public health insurance premiums.

9. Preparation of a project for a unified monthly reporting of employers

In addition to the adopted changes, we would like to inform you about the preparation of a new project for a unified monthly reporting system for employers. The purpose of this project is to simplify the administrative obligations of employers by replacing the existing 25 different regular monthly reports with a single submission. A legislative proposal is currently being prepared, after which a trial operation should be launched from 1 July 2025, and the project would be mandatory for all employers from 1 January 2026.

10. Change in the method of tax depreciation of photovoltaic power plants

In 2025, there will be a change in the method of tax depreciation of photovoltaic power plants. At the time of preparation of this News, the given adjustment has not yet been approved with all the amendments. However,

expects that the 240-month straight-line depreciation applied so far will not be applicable to power plants included in 2025. For assets included in 2025, the equipment will need to be included in the depreciation group according to Annex No. 1 to the Income Tax Act and depreciated according to the rules for the given depreciation groups. At the same time, it is expected that there will be a choice for assets included after July 1, 2024, where it will be possible to choose either the current straight-line depreciation or depreciation according to the relevant depreciation group.

We will keep you informed as the legislative process in this area develops.

II. News in the field of value added tax

A comprehensive amendment to the Value Added Tax Act will enter into force on 1 January 2025 (or later in some cases). This amendment was adopted partly due to the mandatory transposition of European directives and partly to reflect the current decision-making practice of both the Court of Justice of the European Union and the Supreme Administrative Court. The amendment has 460 amendment points and 32 transitional provisions.

The main points that the amendment changes include the following:

1. New rules for calculating domestic turnover and VAT payment

Currently, taxable persons (in simple terms, entrepreneurs) do not have to become VAT payers provided that their domestic turnover for any period of the immediately preceding 12 calendar months does not exceed CZK 2 million. Now, a “rolling” period of 12 months is always evaluated and if an entrepreneur exceeds the CZK 2 million turnover threshold, he becomes VAT payer from the first day of the second month following the turnover being exceeded.

From 2025, the domestic turnover limit will be assessed per calendar year. If a taxable person exceeds the turnover limit of CZK 2 million (cumulatively) for a given calendar year, they will (with exceptions – see below) become a VAT payer only from 1 January of the following calendar year.

However, a new feature is the introduction of a second limit, namely CZK 2,536,500 (i.e. the equivalent of EUR 100,000, which is related to the small business regime – see below). It will apply that if an entrepreneur’s turnover exceeds this amount, he will become a VAT payer “immediately”, i.e. on the second day after the turnover is exceeded. In these cases in particular, it will be necessary to evaluate the entrepreneur’s turnover on an ongoing basis, not, for example, only after the end of the month.

The rules for becoming VAT payers by law due to exceeding turnover are being comprehensively revised and it is necessary to pay due attention to them.

2. Implementation of the small business regime

From 2025, the so-called cross-border regime for small businesses will apply throughout the European Union. Its essence is that taxable persons (typically non-VAT payers) will be able to use the status of non-payer in another Member State of the European Union. This is a voluntary regime, the use of which will be conditional on registration with the domestic tax administration. The entrepreneur will be able to choose for which Member State he will use the regime. The condition for using the regime for small businesses will be that the turnover for the entire European Union does not exceed 100 thousand euros. If the entrepreneur uses this regime and provides a taxable supply with the place of supply in another Member State, for example to a citizen of this state, he will not become a VAT payer in the given Member State.

3. Introduction of the obligation for the customer to refund VAT deductions for certain unpaid invoices

Effective from 2025, a rule has been introduced regarding invoices that are overdue for a longer period. A customer (recipient of a taxable supply) who has claimed a VAT deduction from a given invoice and has not paid the invoice by the end of the sixth calendar month following the due date will have to “return” (in the words of the law, correct) the VAT deduction applied. At the same time, once the customer subsequently pays the invoice to the supplier, the deduction will be able to “reclaim” in the tax period in which the payment was made. The supplier will not be able to automatically refund the VAT paid from an unpaid invoice; this will only be possible in certain cases and if the conditions are met (see the next point).

4. Expanding the possibility of correcting the tax base for bad debts

The existing VAT Act already allows a supplier who has a so-called bad debt (if the conditions are met) to issue a so-called corrective tax document (credit note) and in effect “request” a refund of the value added tax paid in the past. However, the existing rules only apply to some debts, especially those that are included in insolvency or enforcement proceedings. The new legislation expands the possibility of correcting the tax base for bad debts. For example, it will no longer be necessary to register for certain types of proceedings (if other conditions are met).

At the same time, it will now be possible to correct the tax base for small uncollectible receivables without having to pursue them in any court or other proceedings. However, the conditions will be very strict – it will only be possible to correct the tax base for receivables that are more than 6 months past due, provided that the receivable is:

a) up to CZK 10,000 including VAT and

b) will be enforced in writing at least twice.

In addition, the procedure for correcting the tax base for these receivables will only be possible up to a total limit of CZK 20,000 per calendar year for one debtor.

5. Expansion of the possibility to correct the tax base for former VAT payers and the related obligation to correct the VAT deduction

The conceptual novelty of the new regulation is the fact that even “former” VAT payers will be able to correct the tax base (in simple terms, issue a credit note) if they meet the legal conditions. That is, for example, in a situation where the customer, while he was a VAT payer, carried out a taxable transaction, paid value added tax to the state, ceased to be a VAT payer and after this period provided the customer with a discount on the price. Until now, it was not possible to correct the tax base under the VAT Act, but this will now be possible.

An analogous regulation will apply to former VAT payers – customers who are granted a discount at a time when they are no longer VAT payers. These persons will have to correct their tax deduction and pay the related tax to the state.

6. Change in the deadline for claiming tax deductions

Until now, the customer could claim a tax deduction within three years, starting from the first day of the following tax period in which the claim for the deduction arose. The deadline is changing as follows:

a) the period is shortened from three years to two years and

b) the deadline will be calculated differently – the right to deduct VAT will be able to be claimed until the end of the second calendar year immediately following the calendar year in which the right to deduct VAT arose.

In some cases (for example, a performance with a performance date in January), the deadline will be similar, in other cases (for example, a performance with a performance date in December) the deadline will be significantly shorter.

7. New rules regarding real estate

Effective July 1, 2025, the following legislation is being amended:

a) the application of value added tax rates relating to construction and

b) exemption from value added tax on the supply (in particular the sale) of land, other real estate and their lease.

There are no significant changes in the application of value added tax rates for constructions (for example, when supplying construction or assembly work on a completed or unfinished construction or when applying the relevant VAT rate to the supply of immovable property). The novelty in this respect, however, is that constructions will be assessed according to their registration in the land register, or in the basic register of territorial identification, addresses and real estate. However, significant changes will occur in the exemption for the supply of land and other (selected) immovable property.

Effective from 1 July 2025, the definition of so-called building land, the transfer of which is taxable (because it is not exempt from tax), will be narrowed. According to the current rules, any land on which it is “theoretically” possible to build is considered a building land; now, such land will not be considered such if it is clear that the building cannot be placed on the land (on which, according to the zoning documentation, a building can be placed firmly attached to the ground) or it is highly unlikely. The consequence of this change will be that fewer such lands will be subject to value added tax upon their sale.

In the area of ​​the supply of selected real estate, the exemption from VAT will also be expanded, because compared to the current situation, where (even repeated) sales are taxed within a five-year period (simplified from the issuance of the first occupancy permit decision), only the following will be taxed:

a) the first delivery of completed immovable property, in addition to:

b) carried out within a two-year period, more precisely, carried out by the end of the twenty-third calendar month immediately following the completion of the immovable property or its substantial change.

8. New rules for determining the tax base

There are several partial changes in the area of ​​determining the tax base. The most important of these is the new fact that in the case of the delivery of real estate to an employee or a person close to him, the tax base will be the usual price.

9. Change in the rules for determining the place of performance for certain services

VAT rules define where the place of performance is for a given transaction. From the perspective of Czech VAT payers, this is important because the subject of value added tax in the Czech Republic are transactions that have their place of performance in the country.

In the area of ​​the place of performance, the following changes are taking place in particular:

a) the place of performance for services in the field of culture, art, sports, education, entertainment, etc. is being modified. Up until now, the place of performance was the place where the event actually takes place (and was thus subject to value added tax according to the rules of the given state). The new rule is that if the customer’s participation is virtual (i.e. it will be a “streamed” event), the place of performance will be the place of the recipient of such a service – value added tax will thus be collected according to the rules of his state,

b) for some services provided to a non-taxable person (especially citizens) from third countries (outside the European Union), the place of supply is now that third country. This applies, for example, to legal, consulting, accounting, engineering, banking or financial services or the rental of movable tangible property (with the exception of means of transport). This means that if the customer is, for example, a citizen from a third country, the provision of such services is not subject to VAT in the Czech Republic. It will now apply that if such a service is actually used or consumed in the Czech Republic, the place of supply will be the Czech Republic and the “Czech” value added tax rules will apply.

10. Narrowing of VAT exemption for certain financial services

Effective from 1 January 2025 and subsequently from 1 January 2026, the range of financial services that are exempt from value added tax will be reduced. These include, for example, the management of a customer’s assets if the assets include an investment instrument (in the first case) or the provision of direct debits, the collection of radio or television fees, and the payment of pension benefits or the collection of recurring payments from the population (in the second case).

III. News in the field of accounting

We remind you that, effective from 2024, the Accounting Act has been amended, based on which, among other things, it is possible to keep accounts in euros, US dollars or British pounds, provided that one of these currencies is the so-called functional currency for the given accounting entity (i.e. the currency of the primary economic environment in which the accounting entity operates). There has also been a change in the definition of annual total net turnover, i.e. the amount that will be reported as part of the financial statements for 2024.

The Chamber of Deputies of the Parliament of the Czech Republic is currently approving an amendment to the Accounting Act, based on which (following the amendment to the European directive) the financial criteria used for the categorization of accounting entities will increase by approximately 23%. According to the transitional provisions, this change will be effective for 2024, and will therefore be important for evaluating the category of accounting entities for 2025. The amendment to the Accounting Act also implements the next phase of the so-called ESG reporting, i.e. the mandatory preparation of sustainability reports. The aforementioned changes are being discussed in parallel with the amendment to the Act on Equalization Taxes (so-called Pillar 2). We remind you that the Act on Equalization Taxes was adopted from 2024 as part of a “global” project for the taxation of large multinational corporations. These groups are to be taxed at a minimum of 15% of their accounting profit. If a company is a taxpayer of the supplementary tax, this information must be disclosed in the notes to its financial statements.

In addition to amendments to the existing Accounting Act, the process of preparing new accounting legislation is also underway. This project has been delayed compared to original assumptions, with the new accounting regulations not expected to come into effect until 2026, or rather, 2027 at the earliest.

IV. Other news

As is the case every year, a number of parametric changes will take effect from 2025, for example, an increase in the minimum wage (it will now be CZK 20,800 per month), an increase in the average wage and the parameters resulting from it (for example, minimum advances for self-employed persons for insurance premiums, the limit for tax exemption for certain employee benefits), changes in domestic and foreign travel allowances (for example, the maximum amount of exempted meal allowance is derived from these allowances).

provided to employees, which for 2025 will be CZK 123.90 per shift and to increase the amount of flat-rate compensation for home office costs (for 2025 it will be CZK 4.80 per hour).

As can be seen from the overview, the scope and complexity of the detailed changes are significant.

If you are interested, please contact our employees who will help you specifically specify the impact of the changes on your activities.