The Income Taxes Act will bring a series of updates taking effect on January 1, 2027, impacting both employees and employers. Alongside the reintroduction of several previously repealed tax reliefs, a major restructuring of employee benefits will take place. The new framework overhaul replaces the existing aggregate limit system, introduces new tax-advantaged categories, and institutes specific provisions regarding tips.
Reintroduction of the Student Tax Credit and Nursery Allowance
The legislative amendment reinstates the student tax credit at CZK 335 per month. Eligible individuals will include students under 26 years of age or full-time doctoral students up to 28 years of age. The credit can be applied on an ongoing monthly basis through the employer upon presentation of a certificate of study, or claimed as a lump sum in the annual amount of CZK 4,020.
At the same time, the nursery allowance (školkovné)—a tax credit for preschool placement costs—is returning. The credit will correspond to actual costs paid, up to a maximum cap equal to the monthly minimum wage per dependent child (for 2027, set at CZK 24,900).
A new reporting obligation will be imposed on preschool facilities regarding tax authorities. By the end of January of the following year, these facilities must electronically submit details on children, payers, and amounts paid.
Phasing Out the Single Combined Benefit Limit
Currently, non-cash leisure benefits—such as sports, culture, recreation, books, or the use of educational and recreational facilities—are tax-exempt up to a single aggregate annual cap set at half the average national wage.
From 2027, this model changes. The unified cap will be abolished, and individual benefit categories will be subjected to distinct tax treatments:
Corporate social, cultural, and sports events: Contributions to these events will be tax-exempt without monetary limits, provided their provision is customary for the employer and reasonable in scale and form.
Standalone Cap for Recreation and Travel
A dedicated standalone limit of CZK 20,000 per tax period will apply specifically to recreation and holiday packages. Conversely, the use of educational, sports, or recreational facilities and contributions toward books will no longer be subject to the current aggregate limit of half the average wage.
The recreation category is expected to raise several practical interpretation questions. The legislation distinguishes between the "use of a recreational facility" and the "provision of recreation or holiday packages":
- Use of a recreational facility: Not subject to the CZK 20,000 standalone limit.
- Provision of recreation or travel packages: Subject to the CZK 20,000 annual cap.
While using a company-owned holiday cabin versus purchasing a tour package from a travel agency presents a clear distinction, scenarios such as hotel stays, wellness services, or facilities operated by employer partner networks may be less straightforward. Proper classification of each benefit will directly dictate its tax treatment.
New Social Care Benefits for Caregiving Employees
A significant innovation is the creation of a new category of social care benefits. Employers will be permitted to provide non-cash contributions for selected social services, including:
- Home care services
- Personal assistance
- Emergency care services
- Respite care
- Day care center services
This measure enables employers to support employees caring for aging parents, children with disabilities, or other dependent relatives. However, tax benefits will not apply to privately arranged assistance; services must strictly comply with the Social Services Act and satisfy all statutory criteria.
Preventive Healthcare and Health Management
A separate tax regime will govern employer-provided preventive and healthcare benefits:
- Standard health benefits: Subject to a tax-exempt threshold tied to the average national wage.
- Uncapped health benefits: The amendment defines specific healthcare provisions exempt from tax without a monetary cap, provided statutory conditions are met. These include premium preventive check-ups, diabetic screening for high-risk groups, cardiovascular risk assessments, selected oncological screenings, and non-covered vaccinations.
When compliant, these benefits are not classified as taxable income for the employee and are exempt from social security and health insurance contributions, offering employers an effective mechanism to expand corporate wellness programs while optimizing costs.
Tax-Exempt Status for Tips
The amendment introduces a tax exemption on tips for employees in catering and food services. The exemption applies to tips up to 7% of the employer's monthly revenues from catering services. Employers will be responsible for maintaining records of received tips, tracking statutory limits, and allocating amounts correctly among staff.
Key Takeaways and Practical Impact on Employers
For employers, the legislative update entails much more than adjusted or abolished thresholds. The main operational challenge lies in the reclassification of benefit types and navigating distinct conditions for each category.
Employers should anticipate practical challenges regarding proper benefit classification, wellness program structuring, and compliance evaluation for new social care benefits.
Is your organization looking to optimize its benefits scheme under the 2027 tax rules?
If these legislative changes prompt a review of your employee benefit structures, our tax and payroll specialists are ready to assess your current setup and assist with seamless implementation. Contact us today.
This text was translated by AI.
