On 27 July 2021, Act No. 285/2021 Coll., amending Act No. 117/1995 Coll., on state social support and Act No. 586/1992 Coll., on income taxes (further „ITA“), was published in the Collections of Laws of the Czech Republic.
The amendments to the ITA are as follows:
Tax allowance on children
Families with two or more children will receive higher tax relief for their offspring. Tax allowance on the second child increases from CZK 19,404 to CZK 22,320 per year, and in case of the third and following child, it then increases from CZK 24,204 to CZK 27,840 per year.
The increase in tax allowance on children will be applied already for the tax period 2021 i.e. the increase will be applied retroactively from January 2021 but only after the end of the taxable period via annual tax reconciliation or a personal income tax return.
Based on the transitional provision, the increase in the tax allowance will not be reflected in the monthly settlement of wages during the year.
Abolition of the maximum limit for monthly tax bonus payment per child
Employees may currently claim a tax bonus of up to CZK 5,025 per month. If they are entitled to a higher monthly tax bonus, they may claim the rest during the annual tax reconciliation.
| Tax allowance on children | During 2021 | Annual tax reconciliation / Personal income tax return | ||
| Month | Year | Month | Year | |
| 1 child | CZK 1,267 | CZK 15,204 | CZK 1,267 | CZK 15,204 |
| 2 children | CZK 1,617 | CZK 19,404 | CZK 1,860 | CZK 22,320 |
| 3 and more children | CZK 2,017 | CZK 24,204 | CZK 2,320 | CZK 27,840 |
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