News

Meal Voucher Package

The meal voucher package allows employers to provide meal allowance to their employees in the form of cash. The eligibility requirements for meal allowance remain unchanged (it is necessary to work at least 3 hours per shift).

The cash contribution provided by the employer is exempt from tax up to 70% of the upper limit of the meal allowance which can be provided to employees remunerated with a salary during a business trip lasting 5 to 12 hours. In 2021, an amount of CZK 75.60 is tax-exempted.

Differences between classic meal vouchers and meal voucher package:

The value of a classic meal voucher provided by the employer is always fully exempt from tax, social security and health insurance on the part of the employee. For the employer, this becomes a tax-deductible expense of up to 55% of the meal voucher value.

When it comes to the meal voucher package, the amount of CZK 75.60 is tax-exempted on the part of the employee, and any amount above this limit will be taxable income and subject to social security and health insurance and a tax-deductible expense for the employer.

Flat Tax

Since 2021, self-employed persons have the opportunity to apply for what is known as the flat tax. A self-employed person may apply for the flat tax if not in bankruptcy, if not a VAT payer (whether statutory or voluntary), partner in a general partnership or general partner in a limited partnership, or if it does not receive income from dependent activities, except for income taxed by withholding tax, and its income from self-employment did not in the previous tax period exceed CZK 1 million.

The deadline for submitting the applications to the relevant tax office is the 10th day of the relevant tax period. If the self-employment activity commences after the 10th day of the relevant tax period, the natural person may apply for the flat tax from the day it starts with self-employment. However, if the application is submitted after the date of commencing the self-employment activity, the submission is no longer effective.

The flat tax advance for 2021 is CZK 5,469:

• Minimum health insurance contribution of CZK 2,393,
• Minimum social security contribution increased by 15% to the amount of CZK 2,976,
• Income tax in the amount of CZK 100.

The contributions are due by 20th day of each month, with the exception of the January contribution which is due by 22 February 2021. There is also the possibility to pay all these contributions by one payment for the entire year in advance.

Fixed Assets and Income Tax Act Amendment

For the purposes of the Income Tax Act, the separately tangible movables, or sets thereof, adult animals and their groups are deemed as tangible assets if their initial value exceeds CZK 80 thousand. Compared to the wording of the Act valid until 31 December 2020, this limit has doubled. The threshold for technical appreciation has also been increased to this amount. According to the transitional provisions, the wording of this Act may already be applied to property acquired from 1 January 2020 and on completed technical appreciation which is in a state of eligible use from 1 January 2020.

For tangible assets classified in depreciation group 1 or 2 and acquired between 1 January 2020 and 31 December 2021, the taxpayer who is the first depreciator of these assets may apply the “extraordinary depreciation”. Assets classified in the depreciation group 1 can thus be depreciated evenly without interruption up to 100% of the initial value as early as after 12 months. Assets classified in the depreciation group 2 can thus be depreciated evenly up to 60% of the initial price after the first 12 months and then evenly up to 40% of the initial price after the next 12 months.

The current wording of the Act no longer contains a definition of intangible fixed assets. These are now governed by accounting laws, i.e. accounting depreciation will be deemed as a tax-deductible expense, similarly as with small fixed assets. The new wording of the Act may already be applied to intangible assets acquired from 1 January 2020.

Obligations of Self-Employed Persons in 2021

Obligations of Self-Employed Persons Regarding Health Insurance in 2021

The minimum amount of contribution for self-employed persons is increased to CZK 2,393 as of 1 January 2021. This amount is payable by the self-employed persons, who must comply with the minimum basis of assessment, already with the January contribution due on 8 February 2021.

All self-employed persons are obliged to submit the Statement of Income and Expenditure for 2020, regardless of whether they had any income. The deadlines for submission are as follows:

• 3 May 2021 for those self-employed persons filing tax returns without a tax advisor,
• 1 June 2021 for those self-employed persons filing tax returns without a tax advisor electronically after the expiry of the 3-month period following the end of the tax period,
• 2 August 2021 for those self-employed persons filing tax returns with a tax advisor and who notified the health insurance company thereof by 30 April 2021.

If the Statement shows an outstanding amount, the self-employed person in question must settle it within 8 days of submitting the Statement.

The contribution calculated in the Statement for 2020 is first due in the month in which the Statement is submitted.

Obligations of Self-Employed Persons Regarding Social Security in 2021

For self-employed persons who conduct their business as a primary activity, the minimum monthly basis of assessment for contributions is CZK 8,861; the contribution is then CZK 2,588. For those, who conduct their business as a secondary activity, the basis of assessment for contributions is CZK 3,545, and the contribution is CZK 1,036. And the maximum amount of the monthly basis of assessment (for both primary and secondary activity) is CZK 41,396.

The basis of assessment is 50% of the average tax base achieved in the previous calendar year.

 The minimum contribution amounts for self-employed persons are listed in the following table:

	Primary activity	Secondary activity
Up until the month of the Statement submission	CZK 2,544	CZK 1,018
From the month following the Statement submission onwards	CZK 2,588	CZK 1,036

 

Each self-employed person is obliged to submit the Statement on Income, Expenditure and Other Information for 2020 to the applicable social security office.

 

The deadlines for submitting the Statement in 2021 are as follows:

• 2 May 2021 for those self-employed persons filing their income tax returns by 31 March 2021,
• 1 June 2021 for those self-employed persons filing their income tax returns electronically after the expiry of the 3-month period following the end of the tax period,
• 2 August 2021 for those self-employed persons for which a tax advisor submits their income tax returns

Meal Voucher Package to Cause Damage in Distraints, warns Mr Bortlík, tax expert

From the point of view of distraints, the meal voucher package will cause a lot of damage. According to the tax expert Martin Bortlík from APOGEO, it will result in a number of lawsuits in the area of distraints. It will not be clear how to deal with such an allowance in the context of distraint deductions. The meal voucher package has already passed the parliament, and now it is going to be considered by the Senate.

Together with the tax package, the Chamber of Deputies passed the “meal voucher package” as an alternative to classic meal vouchers. The Act will now be reviewed by the Senate. Experts warn that this innovation can cause a lot of lawsuits in the area of distraints. Why?

First of all, it must be noted that the amendment to the Income Tax Act is a typical example of a political (and probably other) assignment which completely failed. The reason presented in the media is the great empathy and compassion of the Czech Ministry of Finance with those employees who are not provided canteen meals or meal vouchers by their employers. However, this good deed will not go unpunished – by an estimated CZK 20 billion cost taken from the state budget. I cannot imagine an employer who would be tempted by the offer to increase the salary of employees for whom the meal voucher package will be exempt from tax and social security and health insurance contributions up to CZK 1,500, but for the employer, it will present a fully tax-deductible expense.

 The true reason for implementing the meal voucher package can be found in the explanatory memorandum to the draft amendment to the Income Tax Act. If you feel you are reading a script to one of the satirical commentaries of Jindřich Šídlo, you are wrong. This justification came straight from the Ministry of Finance. I will leave you to reach your own conclusion. “However, meal vouchers are not an optimal option either, mainly due to the costs associated with commissions for the meal voucher companies. These companies, often based outside the Czech Republic, then transfer their profits abroad which leads to an undesirable outflow of profits from the Czech Republic. These companies also benefit from the limited validity of meal vouchers. The proceeds from such invalid meal vouchers do not stay with the employee but become an income of the meal voucher companies. Despite the administrative complexity and transaction costs, the meal vouchers do not guarantee that they will be used for a meal service or purchase of foodstuffs. And even the purchase of canteen meals or foodstuffs is not guaranteed to be carried out by the employee to whom the meal allowance in question was granted (e.g. providing for family). Nor can it be said that traders who are receiving meal vouchers then do not use them to pay for their purchases. Using meal vouchers for regular meals for the employees in restaurants can often be problematic since such vouchers are not accepted in all restaurants. Other ways of using of meal vouchers, e.g. preparing meals at home from food purchased by the vouchers and bringing them to work, can be problematic at the employer’s workplace (no refrigerator or a kitchen unit etc.).”

Read the full report.

Troubles Ahead: Thousands of Joint-Stock Companies Unable to Reach Their Data Boxes

Since the beginning of 2021, thousands of joint-stock companies’ CEOs are unable to log in to their data boxes and reach their most important, often official, inbox. For example, if such companies need to file an appeal against a court or tax office decision, file a tax return after the statutory due date or communicate with the authorities on the topic of COVID, they are out of luck.

“Due to the amended legislation, the statutory directors of the monistic joint-stock companies are to be suddenly deleted from the commercial register,” says Michael Dobrovolný, manager of Smart Office & Companies from the Apogeo Group.

In the Czech Republic, there are around seven thousand “monistic joint-stock companies”, i.e. those that have a statutory director and a management board instead of a board of directors and a supervisory board (dualistic).

Companies and Experts Shocked

The companies and experts concerned are unable to hide their surprise. “In some cases, it is still possible to go and file at the branch as it used to be, but many submissions need to be filed only electronically,” says Pavel Postl, Apogeo Group partner. According to him, this change will result in many monistic joint-stock companies suddenly being represented by completely different entities than before 1 January 2021.

According to information gathered from our clients, the new access details are being sent out to the members of the supervisory board, but not to the statutory directors,” notes Michael Dobrovolný. He also adds that it is impossible to determine how much time it will take to deliver the new access details.

Foreigners Left Behind

Mr Dobrovolný also points out that foreign directors will be disadvantaged, including our German neighbours, Slovaks or Brits. “To obtain the access details, one must usually come to one of the CzechPoint branches in person, which is often impossible due to current restrictions,” he explains.

Although foreigners can get authorised representatives from the Czech Republic, they must have a power of attorney with an officially verified signature or even an apostille. But this can take up to several weeks.

“What about the deadlines, tax returns and appeals waiting to be submitted, or objections to payment orders?” concludes Dobrovolný.

Survey Shows Companies Spending Too Much on HR

As many as 86% of Czech companies, who have participated in unique research carried out by a team led by Jan Rechnovský, spend too much money on inefficient and often rigid HR. In their view, human resources are often deemed as mere administration of employment contracts.

“Companies do not usually entrust strategic tasks to HR, even though they rely on people,” says Jan Rechnovský, consultant on business processes with many years of experience and a member of the Apogeo Group team dealing with HR as a service offered to clients.

Together with Tereza Svatošová, Payroll & HR Manager of the Group and leader of this team, they offer very interesting insights to the participants of the online seminar. Those who did not participate online can watch the audio recording and the presentation below.

Among other things, the survey showed that in corporate HR positions are usually people who are under-qualified. “They often have a background in humanities and are ideal candidates for assistants or accountants,” Rechnovský explains.

This is connected with a questionable system of evaluating candidates and chaotic process of their onboarding. Companies do not test their candidates adequately, and therefore, identify their weaknesses only later on and lose significant amounts of money.

Rechnovský points out an example: “A salesman who was hired by a leading IT company producing the ERP system based only on submitted CV and interview did not meet the job expectations and left the company after eight months.

It cost the company CZK 1,200,000.” He also adds that “one-third of the expenses consisted of salary costs and the rest was the expected volume of orders.”

The Apogeo team is ready to help our clients avoid similar expensive mistakes.

The audio recording and presentation from the seminar can be found here.

Changes to Expert Services

We are bringing you news about legal obligations arising from the New Act on Experts and Interpreters (“NZOZ”, no. 254/2019 Sb.) which represents a fundamental change for expert services in almost 60 years.

It is obvious that from 1 January 2021, it will be even more necessary to be an experienced professional and true expert on specific issues and expert regulations in order to provide expert services.

The APOGEO Expert Institute, as one of the renowned and largest expert authorities in the Czech Republic, is familiar with all new changes and will continue to provide comprehensive and professional services.

What’s New:

• Commercial expert institutes will now be called expert offices.
• Expert activities can only be performed in person, even as part of expert offices, and not through qualified and instructed persons; only by court experts including local investigations and expert court hearings.
• There is a pressure on sanctions for experts including public records of sanctions.
• Remuneration for experts from public entities continues to be below the usual remuneration for qualified work, i.e. CZK 250-500 per hour.
• Experts must be insured.
• During the 2021-2025 recertification phase, it is necessary to meet the conditions of the new legislation and obtain authorisation in the newly defined fields.
• There is now a legal right to an expert authorisation.
• Within 5 years, existing experts must undergo the general part of the entrance exam testing their knowledge of legal regulations related to the New Act on Experts and Interpreters (NZOZ), Administrative Procedure Code, Code of Civil Procedure, Criminal Procedure Code and Decrees related to the NZOZ Act; they must also have at least master’s university degree in their chosen expert field, if possible, as well as meet other qualification criteria defined by the decree (usually several semesters of extra training courses) otherwise they can ask the Ministry of Justice for an exemption in case of minority fields where it is expected that an exemption can be granted.
• At the same time, they have to have at least 5 years of experience in the given field after completing the master’s university degree.
• The administration of experts/natural persons is now transferred from regional courts to the Ministry of Justice; expert institutes and offices remain unaffected.
• Expert opinions will now be registered with a file number within 5 days of ordering to prevent the issuance of opinions retroactively; therefore, the experts have more administrative duties.
• They will be subject to compulsory reviews checking at least 3 expert opinions in the last 5 years, not only in terms of formal requirements but also substance.
• The experts will not be able to reject court-requested expert opinions; the Ministry of Justice and regional courts will have a complete overview of the unfinished expert opinions for public and commercial entities. District courts will have a limited basic overview but will be able to request a complete overview.
• The customer decides on any bias or related responsibility of the expert who should notify the customer of any conflict of interest.
• Since 1 January 2021, the expert office must have at least one expert per the given field or focus, and two experts from 2022; at least one expert with such authorisation must sign an opinion. Before the NZOZ Act, it was allowed to have only one direct expert and two in a related field, and the cross-guarantee across several expert institutes was also allowed.
• It is not possible to perform expert activities in connection with more than one expert office; at the same time, it is not possible to perform such activities as an independent expert if connected with an expert office, only through such office.

Should you have any questions, we are at your disposal.

Limit Increase for Tangible Fixed Assets

From 1 January 2021, the limit for initial price of tangible fixed assets will change from CZK 40 thousand to CZK 80 thousand. The same limit also applies to technical appreciation.

This new limit may also be applied to assets acquired during 2020 or technical appreciations completed during 2020. Previously recorded assets follow the already existing procedure of depreciation.

Extra-Gross Salary is Over

From 1 January 2021, the gross salary will no longer be increased by health insurance and social security. The tax on employment income will be calculated from gross salary in the amount of 15%.

At the same time, the progressive tax of 23% is applied to the tax assessment base exceeding 48 times the average salary. Therefore, the 7% solidarity tax increase will no longer apply.