Changes to Employee Benefits Effective as of January 1, 2027

The area of employee benefits is subject to frequent changes. The most recent comprehensive revision of employee benefits was part of the so-called consolidation package, which took effect in 2024. In 2024, the scope of non-monetary benefits remained unchanged; however, the amount of income from these benefits that can be exempted on the employee’s side was limited. The exemption limit was set at half of the average wage.

Another change to employee benefits took effect in 2025. This change divided benefits into so-called leisure and health benefits, with a separate exemption limit set for each category. For leisure benefits, the limit of half the average wage continued to apply, while health benefits—independently of leisure benefits, were exempt at the employee level up to a total amount equal to the average wage.

Changes to employee benefits, which are scheduled to take effect on January 1, 2027, will return the conditions for leisure benefits to the state they were before the consolidation package in 2024. The exemption limit on the employee’s side, which remains at half the average wage, is being eliminated, except for non-monetary benefits provided for travel and recreation, for which an exemption limit of up to CZK 20,000 in total per tax period will apply. From a legislative perspective, an employee’s participation in a social event organized by the employer will be reclassified as a leisure benefit; however, there is no substantive change, as this benefit was already fully exempt on the employee’s side under the current version of the Act. Similarly, the amendment does not introduce any substantive change to the category of health benefits, and the exemption limit up to the amount of the average wage will remain in effect.

Effective from January 1, 2027, a new category of tax-exempt benefits will also be introduced, under which non-monetary benefits provided by an employer to an employee or a family member for personal assistance, nursing care, emergency care, respite care, early intervention, or services provided by a day service center or day care facility will be exempt.

The amendment does not fundamentally change the conditions for the tax deductibility of expenses incurred by employers for benefits provided to employees. It will still be the case that expenses incurred for employee benefits that are tax-exempt for the employee will not be tax-deductible for the employer. Expenses for employee benefits provided over the exemption limit—which now primarily includes health benefits and non-monetary benefits for travel and recreation—will be tax-deductible for employers only if the employee’s entitlement to these benefits is stipulated in a collective labour agreement, the employer’s internal regulations, or an employment contract or other agreement.

The condition that these benefits are provided by the employer to the employee in a non-monetary form also remains in effect. It is essential that the employer purchases these goods and services in the form of benefits in its own name and provide them directly to the employee. If an employee were to pay for the benefit themselves first and the employer subsequently reimbursed them for that amount, this would not constitute a non-monetary benefit, and the exemption under Section 6(9)(d) of the Income Tax Act would not apply to such a benefit.

Authors:

Adéla Burešová, Manager, Tax Department

Jan Čapek, Junior Consultant, Tax Department