Starting January 1, 2024, the Czech government introduced a major consolidation package that brought substantial changes to many areas of legislation. One of the most discussed topics among employers has been the adjustment to employee benefits and their tax treatment.
In this article, we’ll outline the most important updates and explain what they mean for both employers and employees.
What Are Employee Benefits?
Employee benefits refer to any non-cash advantages provided by an employer beyond regular wages. These benefits aim to improve the personal or financial well-being of employees.
From a tax perspective, employee benefits can be divided into four categories:
Taxable for employees and non-deductible for employers – the least favorable option for both sides.
Taxable for employees but tax-deductible for employers.
Tax-exempt for employees but non-deductible for employers.
Tax-exempt for employees and tax-deductible for employers – the most favorable structure.
Tax-Favored Retirement Savings Products
Employers can contribute up to CZK 50,000 annually per employee to specific long-term savings products. These include:
Life insurance,
Pension insurance,
Supplementary pension savings,
Long-term investment products (DIP) – newly introduced in 2024,
Long-term care insurance – also new in 2024.
These contributions are tax-deductible for the employer and tax-exempt for the employee, provided they comply with the Income Tax Act (Act No. 586/1992 Coll.).
Key Changes Effective January 2024
To address confusion around the new rules, the Czech Financial Administration issued a methodical guide explaining how benefits should be taxed and valued. Highlights include:
1. Meals and Beverages Provided to Employees
Work-related meals, such as business lunches or meals provided at no extra cost due to lack of choice, are not considered taxable income for employees.
The employer cannot deduct this cost for tax purposes.
2. Snacks and Drinks at the Workplace
Light refreshments and beverages available to all employees (not replacing a full meal) are not taxed for administrative simplicity, provided the value is reasonable.
Non-alcoholic beverages remain tax-exempt if paid from the social fund or post-tax profits.
3. Unified Meal Contribution (“Stravenkový paušál”)
As of 2024, all meal contributions (canteens, vouchers, or cash allowance) fall under a unified structure. For employees:
Tax-exemption applies up to 70% of the daily meal allowance limit (currently CZK 123,90).
Any amount above this threshold is taxable income.
For employers:
These contributions are tax-deductible, provided there’s a written policy or agreement justifying the entitlement.
Contributions must be granted only after the employee has worked at least three hours on a given day.
4. On-site Sports Equipment
Basic sports gear (e.g., rowing machine, foosball table) provided for relaxation or team-building is not considered taxable income if:
It’s used in connection with the workday,
It supports employee well-being or social bonds (not general fitness goals),
It doesn’t resemble commercial fitness services.
However, these expenses are generally non-deductible for the employer.
5. Non-Cash Benefits – New Annual Limit
As of 2024, non-cash benefits (such as contributions to cultural events, wellness services, educational programs, or books) are tax-exempt up to certain annual limits.
For the year 2024 it was half the average annual salary – CZK 21,983.50.
Important notes:
The limit applies per employer, not per employment contract.
If an employee exceeds the limit, the excess value becomes taxable income.
For employers, only the amount exceeding the exemption remains tax-deductible.
New benefit limits for 2025:
The updated Income Tax Act introduces two separate annual tax-exempt limits for employee benefits: one for health-related benefits and one for leisure-related benefits. This change requires careful tracking and classification by employers and HR departments to ensure compliance.
Health-related benefits are tax-exempt up to the amount of the average annual wage, which is CZK 46,557 for 2025 (approximately CZK 3,880 per month).
Leisure-related benefits are tax-exempt up to 50% of the average annual wage, i.e. CZK 23,278.50 for 2025 (approximately CZK 1,940 per month).
These limits apply on a calendar-year basis and cover the period from January 1 to December 31, 2025.
What falls under each category?
Health-related benefits include:
Payments for medical care and services,
Purchase of medical devices based on a doctor’s prescription,
Services from registered medical institutions.
Leisure-related benefits include:
Contributions for recreational or holiday activities,
Sports and cultural events,
Educational courses and training,
Childcare services for preschool-aged children (including kindergartens).
If an employee exceeds the relevant annual limit in either category, the excess value will be treated as taxable income, subject to standard income tax and social/health insurance contributions.
6. Valuation of Non-Cash Income
While the reform introduced many changes, the method of valuing non-cash income remains unchanged. According to the Income Tax Act:
If the employee pays less than market value for a benefit, the difference is treated as taxable income.
Valuation must follow the Act on Property Valuation, but does not require a court-appointed expert – the employer must simply retain evidence of how the valuation was determined.
Final Thoughts
The 2024 and 2025 reforms have created a more unified and structured system for employee benefits. While some advantages are now capped or newly taxed, others remain attractive tools for boosting employee satisfaction. Employers should carefully review their internal benefit policies to ensure tax compliance and take advantage of available exemptions.
Would you like help reviewing your benefit system or adjusting payroll settings in line with the new rules? Contact us – we’ll be happy to assist.