The Czech government’s plan to restrict tax-deductible expenses for employee benefits has sparked concerns among various stakeholders, including companies, gym-goers, and the state. The aim of the proposed changes, set to take effect next year, is to simplify the tax system and prevent potential abuse. However, there are apprehensions that these alterations might result in a reduction of employee benefits.

Currently, companies can offer tax-deductible benefits to their employees, such as health insurance, meal vouchers, and gym memberships. These benefits are also tax-free for the employees. Under the proposed changes, the tax-deductible expenses for these benefits will be limited to CZK 10,000 per employee per year. Any expenses exceeding this threshold will be subject to a 19% tax, which could potentially prompt companies to reduce their employee benefits to avoid the additional tax burden.

Gyms and fitness centers are particularly worried about the impact of these proposed changes. Many individuals rely on their employers’ contributions to afford gym fees, and the restriction on tax-deductible expenses could lead to higher prices for gym memberships. Consequently, gyms may face a decline in customers.

The Ministry of Finance estimates that the implementation of the new rules could result in an annual tax revenue loss of CZK 5 billion, as companies reduce their tax-deductible expenses. The government is concerned about this potential impact and is exploring ways to mitigate the loss of tax revenue.

Opposition parties have criticized the proposed changes, arguing that they will negatively affect employees and small businesses. However, the government maintains that these changes are necessary to simplify the tax system and curb potential abuse.

To gather public input, the Ministry of Finance has initiated a public consultation on the proposed changes, allowing stakeholders to provide feedback until May 31. It remains to be seen whether any modifications will be made to the proposal based on the feedback received during the consultation period.

Article by Prague Forum