Media focused a lot of attention on the proposed income tax law amendments, as proposed by the Parliament and finally approved in the third reading on 20 November 2020. The Parliament forwarded the law amendment to the Senate, which will debate it during its third meeting at the start of December. Let us look at the key amendments which are scheduled to come into effect as of 1 January 2021.


Under the current income tax law, sale of shares is exempt from income tax without any limits. However, there is a condition that the period between purchasing and selling shares must be at least  3 years.

In its third reading, on 20 November 2020, the proposed law amendment was further modified based on an initiative of a group of MPs in a way that the exemption would only apply up to the limit of CZK 20 million for one taxpayer. Income above this level would be subject to standard taxation.

This is a controversial proposal, not only on the grounds of a disputed issue of taxation of capital vs labor, but also due to the fact that the regulation is implemented without any transitional provisions, which goes against the basic principles of certainty and predictability of law, ban on retroactivity or protection of legitimate expectation on the part of a taxpayer. This taxation can also be considered as discriminatory, as it would apply to sale of shares, whereas sale of ownership interests in limited liability companies (s.r.o.) would still be exempt, after meeting the time test.

We are of the view that the proposed amendment should be deemed contrary to the basic principles of the rule of law and we will be closely following its upcoming treatment by the Senate.


The Parliament further approved in the third reading the repeal of the concept of the supergross salary. It is now up to the Senate to decide further in this matter.

What came as a surprise was that the Parliament also endorsed the law amendment which increased the default tax credit per taxpayer from the current CZK 24,840 to CZK 34,125. This amount equals the averages salary in 2019 based on the information by the Czech Statistical Office.

It has by now become obvious that the implementation of both tax reliefs was an oversight during the approval process. It is now up to the Senate to decide whether the final form of the amendment for the President’s signature will retain only one of the two planned tax reliefs, or whether both tax reliefs will apply as of 2021.

If both supergross salary repeal and default tax credit increase passed through the legislative process, income tax would be levied from gross salary at 15% tax rate. Gross salary exceeding 4 times the average salary would then be subject to 23% tax rate. Default tax credit per taxpayer for the entire year of 2021 would be provided at CZK 34,125. When calculating net salary of an employee, the tax credit would be applied proportionally, at 1/12 each month.

Implementation of these two legislative changes would cause a massive tax collection deficit. It is therefore probable that the Senate will only approve one of the two alternatives.

If the Senate decides to increase the default tax credit per taxpayer, not only employees, but also self-employed individuals as well as people with passive income only will benefit from this amendment.

It is estimated that implementation of both changes would cause a tax collection shortfall in the state budget of approximately CZK 130 billion. In addition, the proposed state budget for next year does not take this change into account at all.

Transitional provisions

If the concept of the supergross salary is repealed, it will apply for the entire tax period of 2021 regardless of the fact whether the amendment manages to enter into force on 1 January 2021 or not.

If the amendment enters into force later than 1 January 2021, income tax advances from employment income will still be calculated on the basis of the current law (i.e. using the supergross salary concept). The taxpayer will then reflect the new law for the period prior to its formal entry into force as part of the annual tax settlement, or via a tax return.


The tax package includes the expected amendment of the meal lump sum. A cash contribution provided by an employer to an employee for meals will be exempt from personal income tax up to a specified limit. This will supersede the current regime of providing so-called meal vouchers. For employers, the cash contribution will represent a tax-deductible expense in its full amount. However, employers who prefer to provide meal vouchers going forward though, will be allowed to do so as well. The law provides for both alternatives. You can read more about meal lumps in our article.


The Parliament approved in its third party the amendment relating to tax depreciation of assets. You can read about the changes introduced by this amendment in detail in this article.

In summary, the amendment provides for the following:

  • Repeal of the concept of intangibles as currently defined;
  • Increase of the limit for depreciating tangible assets up to CZK 80 thousand;
  • Implementation of the accelerated tax depreciation for tangible assets classified in 1st and 2nd tax depreciation groups.

No further changes have been made to the draft law. The new method of depreciating assets for tax purposes can be applied for assets acquired as of 1 January 2020. It is estimated that the proposed amendment will cause a negative hit to the state budget of CZK 11.1 billion in 2021 and CZK 15.6 billion in 2022 respectively.