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Czech Rep

25 November 2020

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Czech Parliament Considering Tax Package for 2021 Including New Two-Bracket Individual Income Tax and Other Changes for 2021

The Czech parliament is considering a draft bill that provides for the introduction of a new two-bracket individual income tax and other tax changes for 2021. The draft bill is currently before the Senate (upper house of parliament), following its approval in the Chamber of Deputies (lower house) on 20 November.

With respect to individual income tax, the main change is the replacement of the 7% solidarity contribution with a new higher tax rate, resulting in the following brackets:

  • Annual income up to 48 average wages - 15%
  • Annual income over 48 average wages - 23%

The current average wage is CZK 34,835, which is to be increased to CZK 35,411 for 2021, meaning the higher rate bracket threshold will be CZK 1,701,168.

Another important measure is the introduction of accelerated depreciation for tangible assets in the first and second depreciation groups acquired between 1 January 2020 and 31 December 2021. With the accelerated depreciation, assets in the first group may be depreciated in 12 months instead of 3 years, and assets in the second group may be depreciated in 24 months instead of 5 years. Further, 60% depreciation is allowed in the first 12 months for the second group. Accelerated depreciation is also provided for intangible assets. This will be provided with an increase in the threshold for mandatory depreciation (full write-off) from CZK 40,000 to CZK 80,000.

For more information click the following links for releases from the Ministry of Finance on the tax package and its approval by the Chamber of Deputies.

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