Document 4 - Amendment to the Income Taxes Act - RJ

[1/2] The proposed law brings several significant changes in the area of taxes, social support and excise taxes. The changes include: 1) An increase in the basic taxpayer discount to 75% of the average gross monthly wage, which is CZK 34,624 for 2026, and the introduction of its regular indexation. 2) An increase in the tax credit for the first child from CZK 15,204 to CZK 22,320 per year, which unifies support for all children in the family. 3) An increase in the parental allowance from CZK 350,000 to CZK 420,000 and the introduction of its automatic indexation according to price growth and real wages. 4) Introduction of excise duty on still wines in the amount of CZK 2,340/hl, which will bring income to the state budget. 5) Adjustment of the child component within the state social assistance benefit, which simplifies the system and increases support for lower-income households. Practical impacts include a reduction in the tax burden for individuals, an increase in financial support for families with children, and higher costs for still wines. Businesses and individuals must adapt their tax calculations to the new rules, while parents can expect higher contributions and simpler administration. The Act enters into force on 1 January 2026.

[2/2] This section of the legal document introduces several changes and new rules concerning the parental allowance, the indexation of the allowance, the tax rates on wine and intermediate products, and the child component within the state social assistance. Practical summary:

1. Parental allowance:

   • The parental allowance can be changed no earlier than 3 months after the last change. The choice of the amount of the allowance must be made in writing at the regional branch of the Labour Office.
   • If the parent received a similar benefit in another country, the amount paid by that state is deducted from the total amount of the contribution.
   • The contribution will be indexed annually from 1 January on the basis of price growth and one-third of real wage growth. The first indexation is planned for 1 January 2027.

2. Tax rates on wine and intermediate products:

   • The tax on still wines is newly set at CZK 2,340/hl (previously CZK 0/hl). Sparkling wines and intermediate products remain at the same rate of CZK 2,340/hl.

3. Child Folder:

   • The child allowance is conditional on the household having a dependent child, income not exceeding four times the subsistence minimum and all household members (except vulnerable persons) being employed.
   • The amount of the child allowance depends on the household income and the subsistence minimum. For example, the amount per child is CZK 1,000 if the household income is between 1.43 and three times the subsistence minimum.
   • If a member of the household neglects the child’s compulsory school attendance, the child allowance is not counted for 3 months.
   • The government can increase the amounts of the per child component based on the increase in consumer prices if the index rises by at least 5%.

Practical impacts:

• Parents must monitor the possibility of valorisation of the parental allowance and, if necessary, submit a request for a change in its amount.
• Producers and distributors of still wines have to take into account the new tax rate, which may affect prices for consumers.
• Households with dependent children must ensure that all members (except vulnerable persons) are employed in order to be able to draw on the child allowance.

New fees, penalties, costs:

• Increase of the tax on still wines to CZK 2,340/hl.
• The possibility of reducing or not counting the component per child in the event of neglecting compulsory school attendance.

Temporary measures:

• The sanction for neglecting the child’s school attendance lasts for 3 months from the date of entry into force of the decision.

Specific steps:

• Parents must submit a written application for a change in the amount of parental allowance to the regional branch of the Labour Office.
• Producers of still wines must adjust prices and tax calculations according to the new rate.
• Households must monitor the income and work activity of members in order to meet the conditions for the child allowance.