Czech Republic Delays Tax Changes Until 2014

by Ulrika Lomas, Tax-News.com, Brussels

10 November 2011

Czech Finance Minister Miroslav Kalousek has announced that the government’s proposed reform of taxation in the Czech Republic will be delayed until 2014.

According to the finance minister, the provisions will not now enter into force in 2013 as originally planned, as more time is needed to implement the required legislative changes.

The key measure contained in the government’s tax reform plans provides for an increase in the existing rate of income tax from 15% to 19%, as well as for changes to the basis for calculation of the tax.

In accordance with the government’s plans, in future the normal gross salary of an employee will serve as the basis for calculating the tax. The tax base will no longer include the employer’s social insurance contributions, as is currently the case. Consequently, despite the rise in the rate of income tax, the government expects the overall tax burden on individuals to fall.

Under the tax reform plans, insurance contributions will also rise from 11% to 13%, while social and health insurance contributions for employers will be replaced with a new tax of 32.5%. Currently the employer contributions amount to a total of 34% of gross salary.

The new provisions pertaining to the taxation of gambling in the Czech Republic will, however, enter into force from the beginning of 2012 as initially planned.

The coalition government has decided that revenues derived from the lottery tax are to be divided between local authorities and the state.

Recommended