At the end of 2021, the government specified information in Decree No. 356/2021 that influences the increase of the average wage and it also passed Decree No. 405/2021 Coll., which increases the minimum wage starting from January 2022. This news does not only impact the issue of pension insurance, but also the area of personal income tax and social security insurance and in public health insurance.
From January 2022, a further increase to the minimum monthly wage by CZK 1 000, i.e., from CZK 15 200 to CZK 16 200, was made based on a proposal of the Czech Ministry of Finance. Apart from the employees working for a minimum wage, who will see their finances improve, this increase has consequences for several important limits decisive for tax and other payment obligations.
The minimum wage and health insurance for persons without taxable income. The minimum wage is the assessment base for health insurance for persons without taxable income, such as students above 26 years of age or the unemployed outside labour office records. Persons without taxable income pay health insurance by themselves and thus in 2022 they will be paying insurance companies more than last year, specifically CZK 2 187 per month, as a result of the increase of the minimum wage. Persons without taxable income must already pay the new amount for January 2022, specifically by 8.2.2022.
The minimum wage and small income at the labour office. In accordance with the Employment Act, an applicant for employment can be kept in the labour office’s records if his/her monthly wage from employment or remuneration from work contracts does not exceed half of the minimum wage, i.e., the amount of CZK 8 100 for the year 2022.
The minimum wage and the Income Tax Act. According to the Income Tax Act, income in the form of regularly paid pensions is exempt from income tax up to 36 times the minimum wage. In 2022, pensions of up to CZK 583 200 per year will therefore be exempt from income tax. Further, the increase of the minimum wage will influence the possibility of achieving a tax bonus. In 2022, a taxpayer that has income amounting to at least six times the minimum wage, i.e., a taxpayer with annual income from employment or from self-employment reaching at least CZK 97 200, has a right to such a bonus. The minimum wage also influences the maximum amount of the discounts for the placement of a child, which increases to CZK 16 200 per year for 2022.
The average wage for 2022 increased to CZK 38 911 on the basis of Government Decree No. 356/2021 Coll.
Premiums for social security and health insurance. The average wage also influences the minimum and maximum bases of assessment and the amount of the insurance premium instalments for the self-employed. The maximum annual base of assessment for employees and the self-employed for the purposes of social security is set in the amount of 48 times the average wage, i.e., CZK 1 867 728 (the ceiling for the payment of health insurance has not been set). All of the self-employed performing a main activity have to pay monthly instalments on social security and health insurance, which are based on the gross profit the self-employed person achieved in the previous period. At least the minimum amount of the monthly instalments must always be paid. This minimum instalment depends on the average wage. The new amount of the minimum instalment for social security for the self-employed in 2022 amounts to CZK 2 841 and the new amount of the minimum instalment for health insurance in 2022 amounts to CZK 2 627. If the self-employed performs his/her activity as a supplement, he/she incurs the obligation to be a participant in pension insurance, if the difference of the income and the expenses exceeds 2.4 times the average wage, i.e., an amount of 93 387 for the year 2020.
Flat-rate tax. The new amount of the flat-rate tax in 2022 amounts to CZK 5 994. You can learn more about the flat-rate tax in our article Flat-rate tax after the end of the first year.
Income tax. The progressive income tax rate of 23% applies from that part of the tax base that exceeds 48 times the average wage for the tax period, i.e. the amount of CZK 1 867 728.
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