Increase of the minimum wage

On 5 November 2021, the government approved an increase in the minimum wage from the current CZK 15,200 to the amount of CZK 16,200. This will be accompanied by an increase in the minimum guaranteed wages in eight job groups, differentiated mainly according to their complexity and responsibility.

Limit for exemption of income from regularly paid pensions

The impact of the minimum wage increase will be felt, for example, by people receiving pensions or annuity. This income is exempted only up to 36 times the minimum wage. In the year 2021, the amount of the exemption limit was CZK 547,200, above which the pension is not exempt and must be taxed. In the year 2022, people receiving a pension will be better off, as the exemption limit is increased to CZK 583,200.

Levies for persons without taxable income

Persons without taxable income will also be affected by this change. These persons pay advance payments for health insurance in the amount of 13.5 % of the minimum wage. In the year 2022, persons without taxable income will pay the amount of CZK 2,187 per month.

“Nursery school fees”

Another advantage for the taxpayer is the increase in the limit for tax credit for placement of a child in a preschool facility. The so-called “nursery school fee” is applied in the calculation of personal income tax and, as a result of the increase in the minimum wage, an amount of CZK 16,200 will apply in the following year.

Limit for payment of a tax bonus

Since 2018, a prerequisite for claiming a tax bonus is the taxpayer’s income according to article 6 and article 7 of the Income Tax Act (i.e. from employment and business) in the amount of at least 6 times the minimum wage. To qualify for the tax bonus, you need to have annual income of at least CZK 91,200 in 2021. From the year 2022, this limit is being raised to the amount of CZK 97,200.

Increase in the average wage

Based on government decree No.356/2021 Coll., the average wage will increase to CZK 38,911 from 1 January 2022. The amount of the average wage affects the amount of the monthly advance payment for self-employed persons in the flat-rate tax regime, the amount of minimum social security and health insurance contributions and the application of the progressive tax rate for natural persons.

Progressive tax rate

Following the cancellation of super gross wage, a progressive tax rate is now applied to personal income tax. The key to applying this rate is 48 times the average wage, which for 2022 will be CZK 1,867,728 – i.e. the tax rate of 23% in 2022 will apply to those employees whose income exceeds CZK 155,644 per month.

Maximum base of assessment and advance payments in the flat-rate tax regime

Furthermore, the increase in the average wage is reflected in the calculation of the maximum assessment base for social security contributions for both self-employed persons and employees. The threshold for the maximum assessment base is also set at 48 times the average wage, so the amount for 2022 reaches the above-mentioned CZK 1,867,728. From the income exceeding this threshold, social security contributions are not paid.

With regard to the amount of monthly advance payments for self-employed persons in the flat-rate tax regime, the advance payments have been increased to CZK 5,994 per month (for 2021 the advance payments reached CZK 5,469 per month).

Minimum base of assessment

The average wage also affects the minimum assessment base for determining public health insurance contributions for self-employed persons. The calculation of advance payments is based on the average monthly gross salary, with an insurance rate of 13.5%. For the year 2022, the monthly amount is therefore increased to CZK 2,627 (instead of the current CZK 2,393).

Social security contributions for self-employed persons will also be subject to an increase in advance payments. The minimum amount of the advance payment of the insurance premium is now increased to CZK 2,841 for the main activity and to CZK 1,137 per month for a secondary activity.