This year, July has been very fruitful in terms of tax changes. Changes introduced by the Act on Social Assistance amendment, which also includes revisions of Income Tax Return Act, will be welcome mainly by families with a number of children. You will find out about the changes to tax benefits, bonuses and assistance for children further below.
Higher tax benefit
Tax benefit is a defined amount that can be used to reduce the total tax payable.
As a result of the Income Taxes Act amendment from July 2021, the benefit amount increases, but only for second, third (or any other) child born to a family.
First child tax benefit stays the same and amounts to CZK 15,204 per year (CZK 1,267 per month). Second child tax benefit increases from CZK 19,404 to CZK 22,320 (from CZK 1,617 to CZK 1,860 per month). Third (and further) child tax benefit increases from CZK 24,204 to CZK 27,840 (from CZK 2,017 to CZK 2,320 per month).
The above changes are summarized in the table below:
Old regime New regime
Annually Monthly Annually Monthly
First child CZK 15,204 CZK 1,267 CZK 15,204 CZK 1,267
Second child CZK 19,404 CZK 1,617 CZK 22,320 CZK 1,860
Third and any other child CZK 24,204 CZK 2,017 CZK 27,840 CZK 2,320
Even though the amendment took effect this July, the higher amounts of tax benefits already apply retroactively, as of 1 January 2021, but only through an annual 2021 payroll tax settlement or when filing an annual tax return. When calculating monthly salaries and tax advances, the prior amounts will still be applied for the rest of the year.
The state will thus refund tax overpayments to taxpayers which can reach up to CZK 6.5 thousand for a three-children family.
As of January 2022, the new higher tax benefit will be used in a standard manner during a monthly payroll settlement.
There is still time left for IT developers!
All IT developers programming new payroll systems will be pleased to know that they do not have to update the payroll systems immediately, and change them mid-way through the year. The system update will only be needed for the annual payroll tax settlement.
Tax bonus without limits
There will also be changes to the tax bonus. Taxpayers with large families and lower incomes do not have a possibility to apply the tax benefit to its full extent, as their tax payable is too low. This is why the state pays out an amount which cannot be deducted to taxpayer as so-called tax bonus. As a result of this scheme, the tax benefit can be enjoyed by all families with children without exceptions.
Under the old rules, the tax bonus amount was limited to CZK 5,025 a month and it was not possible to get more regardless of the number of children one had. Tax bonus lower than CZK 50 was not paid out at all.
The adopted Income Tax Act amendment abolishes the monthly limit of CZK 5,025 used to calculate the tax bonus. However, this change will only start to apply as of January 2022.
The annual tax bonus limit of CZK 60,300 was already abolished through the tax package in effect as of 1 January 2021. Employees whose tax bonus in 2021 would exceed CZK 5,025 per month will therefore not lose their benefit. However, the amounts will be paid to them only as part of the 2021 payroll tax settlement.
The amendment also abolished minimum threshold as of which the tax bonus was paid, as follows:
Period Minimum Maximum
Annual CZK 100 abolished as of 1 January 2021
Monthly CZK 50 abolished as of 1 January 2022
Assistance for children
In connection with financial assistance to families with children, let us also quickly summarize changes in the Act on State Social Assistance, which are being introduced in parallel to the tax changes.
On this front, the upcoming changes are also positive for families: not only are social assistance amounts increasing, but income threshold as of which they apply increases as well.
I order to claim assistance for a child, the household income should not exceed a certain multiple of a minimum living wage. Formerly, social assistance could only be obtained by households whose income was lower than 2.7 times the minimum living wage. As of July 2021, assistance for children can be claimed by all households whose income does not exceed 3.4 times the minimum living wage.
Are you not sure if you belong in this category? In order to assess your eligibility for child-related assistance, you can use the following calculator.
Child-related assistance differs depending on whether at least one or the two parents is economically active and based on the child’s age. Higher amounts will already be in effect as of July 2021.
Child’s age Family economically active Family economically inactive
Until 6 years CZK 1,130 (formerly CZK 800) CZK 630 (formerly CZK 500)
6-15 years CZK 1,270 (formerly CZK 910) CZK 770 (formerly CZK 610)
15-26 years* CZK 1,380 (formerly CZK 1,000) CZK 880 (formerly CZK 700)
*) for children without own means
As of 1 July 2021, families with children can thus increase the amount of assistance they receive up to three times.
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