The General Financial Directorate (GFD) has published official guidance concerning the taxation of employee benefits in the form of shares or stock options within employee equity incentive plans. These changes follow the recent amendment to the Income Tax Act introduced by Act No. 84/2025 Coll. We have informed you about the working version of this guidance in our earlier article.
Overview of the Legislative Change
The amendment provides employers and employees with an option to defer the taxation of income arising from the acquisition of a share in a business corporation or a stock option, provided this income is linked to the employee’s dependent activity (employment relationship).
This deferral applies not only when the employee acquires a share in their direct employer but also when the share or option is granted by a parent company, subsidiary, or another related entity within the employer’s group.
Key Change: Timing of Taxation
As of 2024, the new legislation allows for the taxation of such employee income to be deferred until a later moment defined by the law, such as the sale of shares, termination of employment, or other specific events. More information in this article.
Retroactive Application for 2024
In response to requests from employers, the Ministry of Finance pledged to introduce retroactive application of the deferral rules for the 2024 tax period. This has now been formalized by Act No. 84/2025 Coll., which came into force on 1 April 2025.
Important Deadlines and Employer Obligations:
Employers must explicitly choose to apply the deferred taxation regime.
This choice must be notified to the tax authority by the 20th day of the month following the acquisition of the share or option.
For income derived before 1 April 2025, employers have until 2 June 2025 to notify the tax authority if they wish to apply the new rules retroactively.
If the employer fails to notify the tax authority within the applicable deadline, the income will be treated as if it was recognized in May 2025 (for income taxable through monthly payroll) or in the 2025 tax year (for income taxable through annual tax returns).
Tax Authority’s Tolerant Approach for 2024
Acknowledging the expectations created by the Ministry of Finance’s prior statements, the GFD confirmed that the Czech Tax Administration will accept either approach for 2024:
The new deferred taxation regime (if properly opted-in and notified), or
The original regime effective until 31 December 2023.
This also applies to cases where no payroll tax was withheld, and the income is instead reported by the employee in their personal income tax return.
Who Makes the Decision?
In all cases the employer, not the employee. In the case of international employee share plans, it is often the foreign company (not the Czech legal employer) that must make the election and notify the Czech tax authority.
Social and Health Insurance Implications
Act No. 84/2025 Coll. also introduces aligned provisions to the laws on:
Social security and unemployment insurance, and
Public health insurance.
The same choice mechanism applies as with income tax. However:
The Czech Social Security Administration will not adopt the tax authority’s tolerant approach for applying the previous regime.
The Ministry of Health, on the other hand, aligns its interpretation with the GFD, meaning the deferred taxation treatment may also apply for health insurance purposes.
Practical Takeaways for Employers
Carefully review employee share and option grants made in 2024.
Decide whether to apply the deferred taxation regime.
If choosing the new regime, notify the tax authority in time.
For international group plans, coordinate with the foreign parent or group entity that issued the options or shares.
Be mindful of differing interpretations between tax, social security, and health insurance authorities.