Tax Cuts Will Take Effect On Jan 1

The tax package will take effect in early January. The Interior Ministry has already received an order from the Chamber of Deputies to announce it. It will be published in the Collection of Laws on 31 December.

In December, the bill was approved by deputies and senators. President Miloš Zeman did not sign it, but he did not veto it and returned it to Vondráček on Monday. According to Deputy Prime Minister Jan Hamáček, the signature was also attached by Prime Minister Andrej Babiš. The law will enter into force on 1 January. As one of the main changes, the tax package brings the abolition of the so-called super-gross wage.

The president announced his decision not to sign the tax package on 20 December. The president has 15 days to sign or veto the law. According to the parliamentary website, the tax package was received by the president on 22 December.

As one of the main changes, the tax package brings the abolition of the so-called super-gross wage. Since 2008, the income tax for employees has been the gross wage plus compulsory employer’s contributions. Newly, the tax base should be only the gross wage. Simultaneously, the law increases the tax rebate per taxpayer by CZK 3,000 per year next year and the following year. According to the Ministry of Finance, the abolition of the super-gross wage alone can prepare the state budget by about 52 billion crowns.

The original version, approved by the Chamber of Deputies in November, meant a shortfall in tax revenues of public budgets of approximately 130 billion crowns. The state budget accounted for a shortfall of about 88 billion crowns. The Chamber of Deputies adopted the Senate version package, which will mean a loss of revenue for the state budget of 87.5 billion crowns. The approved state budget does not take this into account.

The deputies approved the budget, and the president signed it with a deficit of 320 billion crowns. The opposition criticized the budget as unrealistic for this and other reasons.

The law is to enter into force on the first day of the calendar month following its promulgation, but not before 1 January 2021. The Ministry of Finance has previously stated that abolishing the super-gross wage and the tax rebate increase will be effective throughout the next year. The rate of excise duty on diesel should fall from January.