Especially in times of economic development and labour shortage, employee benefits can help retain the employees’ quality and increase their satisfaction. I have chosen the most utilised benefits for you and their proper taxation.
The employer’s contribution to the pension insurance, supplementary pension savings and private life insurance for the employee
Employer´s contributions, which do not exceed 50 000 CZK annually for all types of insurance, are income exempted from income taxes. There are new conditions to increase the limit of the exemption from the 1st of January of 2017. The condition for the tax exemption is arranging the limit for payment after 60 months and after the age limit of 60 years. The condition of the insurance contract does not allow the payment of other income, which is not part of the insurance benefit, not for the reason the insurance benefit could be cancelled via the contract. The tax benefit cannot be used in the case when the employer provides the financial benefit directly to the employee.
For the employer, these benefits are tax deductible payments to the employee with no respect to their extent, if their provision arises from the collective agreement, internal directive of the employer, employment or other contracts.
Contributions to health, culture, sports and recreation
The employer can provide the benefit to the employee or his family comprising visits to the theatre, massages, rehabilitation, medical examinations, vaccinations, membership to a fitness centre or visiting a sport match. All of these benefits are exempted from income tax from the dependent activity if it is only a non-monetary fulfilment of the employer. The non-monetary fees are exempted from taxes too without a limit amount. The only exception is the benefit for recreation, which can be exempted only to the amount of 20 000 CZK annually.
In the case of the employer, it is always the cost, which is tax exempt. The cost has to be paid from the culture and social needs fund or from another social fund, from the profit after taxation or it is a non-tax cost.
Contribution for placing a child in kindergarten
The cost for the operation of the company’s own kindergarten or the cost for the operation of the kindergarten ensured by another subject are tax deductible cost. In the case of the employer, it is an income, which is taxed by the income tax from the dependent activity. The employer can decide that the non-monetary benefits will be considered as a tax non-deductible cost. In this case, the non-monetary benefit will be exempt from income on the employee´s side.
Transport of the employee to and from work
In the case when the employer provides the transport of the employee to and from the work and the transfer is free, it is a non-monetary income of a normal price on the employee´s side. The employee would pay this price by using public transport. This non-monetary income of employee is taxed by income tax from the dependent activity. If the employer pays the employee´s cost of expended fuel because of the transport to and from the work by his private car on the basis the receipts of the purchase of fuel, this cash income will be also taxed.
Should the costs be tax deductible on the employee´s side, the condition is the non-monetary or cash fulfilment regulated by the collective agreement, an internal directive, or a direct employment or other contract concluded with an employee.
Providing gratuitous temporary accommodation for the employee
Temporary accommodation provided by the employer is exempted from income tax for the employee only if:
- it is non-monetary fulfilment in accordance to the performance of the work,
- it is not an accommodation during a business trip,
- the place of temporary accommodation is not the same place for living of the employee in amount of up to 3 500 CZK for a month.
The income of the employee will be taxed by income tax from the dependent activity in the case when the cash benefits provided by the employer applies to the employee´s accommodation in the place of the employee´s place of living in a flat or family house. The employer could consider all of these costs connected with a temporary accommodation of employee as tax deductible cost if this fulfilment is regulated by the collective agreement, an internal directive or by a direct employment contract.
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