Calculation of tax exempt basic allowance
• The tax exempt basic allowance of the resident individual will be increased to EUR 6000 per annum (EUR 500 per month), but this applies only when individual’s annual income will not exceed EUR 14 400 per annum. For the calculation of tax exempt basic allowance, the term „annual income“ includes inter alia dividends, pension and foreign income.
• The tax exempt basic allowance will be reduced regressively from the monthly gross income of EUR 1200 according to the formula 500 – 500 / 900 × (payment – 1200) and it will not be allowed to calculate any tax exempt basic allowance starting from the monthly gross income of EUR 2100 (i.e. in case of annual income of EUR 25 200 and more).
• Due to the increase of tax exempt basic allowance, the additional tax exempt limits for pension income and compensations for work injuries and occupational diseases will be abolished.
• The order of individual’s application for taking into account the tax exempt basic allowance in the monthly withholding will be changed. The individual may apply in the application on a monthly basis to take into account the lesser amount of allowance than prescribed in law and the individual may always change that application during the year.
• However, if the gross monthly income subject to withholding has been in a particular month less than usual, then the withholding agent may no longer account the tax exempt basic allowance on an aggregated basis from the beginning of the calendar year. If in some month certain amount of tax exempt basic allowance remained unused, then the final setoff will be made in the individual annual income tax return.
• Also, the withholding agent can not exceed in the calculation of tax exempt basic allowance the limits prescribed by law to the respective amount of gross monthly income. For example, if in addition to the basic salary the individual derives in some month also additional income or bonuses, then the calculation will be based on the total payments of that month and if these will exceed EUR 2100, then the withholding agent can not apply any tax exempt basic allowance for the respective month.
• The final calculation of tax exempt basic allowance will be based on an annual calculation in the individual annual income tax return and thus this may be different from the monthly calculations, when the individual derives income from several sources or receives different types of income. In such a case, additional income tax liability may arise for the individual in the annual income tax return.
• In order to avoid the additional income tax payment due by the 1 July of the folllowing year, it is recommended that all individuals will analyse and forecast their expected annual income, as well as other allowed deductions from their taxable income (e.g. additional tax exempt income for their second child or under certain conditions for their husband or wife, housing interest, certain education expenses, gifts and donations, contributions to the third pillar of the pension scheme).
• If the individual would like to avoid the additional income tax payment without analysing and forecasting the expected annual income, then the individual should apply in the application to the withholding agent for the application of the lesser amount of monthly tax exempt basic allowance than prescribed by law, or submit an application that the withholding agent will not apply any monthly tax exempt basic allowance.
Fringe benefit – company passenger car
• The monthly value of the fringe benefit upon any non-business use of the company passenger car will be generally EUR 1,96 (in case of more than 5-year old passenger cars – EUR 1,47) per each kW of the car. This change will abolish the obligation to keep logbooks on each trip driven with the company passenger car, as the value of the fringe benefit will no longer depend from the amount of private trips driven with the car. If the company passenger car will be used only for business purposes, then the employer must inform on this the car register, which will make the relevant entry to the register.
Health promotion expenses – exemption from fringe benefit taxes
• Fringe benefit taxation will no longer be applicable to listed expenses of the employer, which are made for employees’ health promotion purposes and these are available to all employees. Such exemption is limited to EUR 100 per quarter for each employee. The list of such expenses includes the costs for the use of certain sporting facilities, rehabilitation services and expenses incurred upon covering private health insurance contributions for the employees.
• In order to restrict the intra-group loans, the new law provision will be introduced, under which the income tax must be paid on hidden profit distributions – certain loans granted to the parent or sister company, if the terms and substance of the loan refer to the profit distribution. If the term of such loan granted to the parent or sister company is longer than 48 months, then it is presumed that it can be a hidden profit distribution and the taxpayer is liable to prove the opposite.
Interest received from the credit institution
• The tax exemption on certain deposit interest received by the individual from the credit institution will be abolished.