Changes in relation with motor vehicles from a perspective of a company and employee

News related to company vehicles and travel allowances

Barbora Halousková
15/08/2022
Changes in relation with motor vehicles from a perspective of a company and employee
In today's article, we have prepared a summary of the changes linked with the extensive amendments to the Road Tax Act, the taxation of low emission vehicles used by employees also for private purposes, and a short update on extraordinary tax depreciation. In the end, we will also briefly look into the changes related to travel allowances.

Road tax

Changes to the road tax have been widely discussed since the beginning of the year. This wave was kicked off by the Minister of Finance's general pardon of 24 March 2022, which announced the abolition of the obligation to pay advance payments on road tax in 2022. Subsequently, an amendment to the Road Tax Act was declared on 8 June 2022, which took effect on 1 July 2022, and which, according to transitional provisions, will apply retroactively from 1 January 2022. For your information, we summarise the most significant changes below.

Tax advances and registration

This amendment reflects the content of the general pardon and therefore abolishes the payment of advances permanently. The taxpayer is thus obliged to make only one payment per year, namely within the deadline for submission of the tax return and payment of the tax, i.e., by 31 January after the end of the tax period. Simultaneously, the taxpayer is no longer required to submit a registration application for road tax.

Change in the object of the tax

At the same time, the object of the tax, i.e., the list of vehicles subject to the road tax, has been significantly narrowed. The taxable vehicles are now only road vehicles of categories N2 and N3 and their trailers of categories O3 and O4 if they are registered in the register of road vehicles in the Czech Republic. This means that passenger cars (including buses) are no longer subject to the tax.

Previously, the employer, as the taxpayer, was also obliged to pay road tax if it paid travel allowances to its employee for the use of the employee's car or trailer (at the relevant rates or CZK 25 per day of use). This is also abolished.

At the same time, a taxable vehicle is not subject to tax in a calendar month in which all the statutory conditions were not fulfilled. This is the case, for example, where the registration plate is officially deposited.

Tax rates for taxable vehicles

The various tax rates are newly abolished directly in the Road TaxAct, as well as the reduction of tax according to the age of the vehicle; however, we can find tables stipulating the amount of tax for taxable vehicles according to the individual categories in the annex.

Some of these vehicles are zero-rated and therefore, neither tax is payable on such taxable vehicles, nor should they be included in the tax return. For vehicles in category N, this covers always the lowest weight group of the maximum permissible weight in tonnes for each number of axles, e.g., for bodywork type code BA or BB and number of axles of 2 up to a maximum permissible weight of 12 tonnes, for vehicles in category O, it covers trailers with a maximum permissible weight of up to 12 tonnes.

The data on the vehicle in question shall be ascertained based on the information given in the technical document.

Tax return

The taxpayer is obliged to submit a proper tax return if he or she has operated at least one taxable vehicle. Only such a taxable vehicle shall be included in the return:

  • whose partial tax is more than CZK 0,
  • for which a tax credit applies (in the case of combined transport); or
  • which is exempted provided that the partial tax would otherwise be higher than CZK 0.

If the tax calculated in the tax return is less than CZK 100, no tax will be assessed or paid.

Simultaneously, please note that in the future, even persons who have not been obliged to file their tax returns electronically in the past will have to do so automatically since 1 January 2025.

Taxation of a low-emission vehicle for private use  

If an employee is allowed to use a company vehicle free of charge for both business and private purposes, the benefit must be reflected in the employee´s income. Until now, the amount was equal to 1% of the entry price ("EP") of the vehicle. From 1 July 2022, the law was extended to include the concept of a low-emission motor vehicle. When using such a vehicle, the employer will only include 0.5% of the EP of the vehicle in the employee’s income (if the EP does not include VAT, the amount will be increased by the VAT). However, as previously, this income must amount to at least CZK 1,000.

Vehicle emission marginal limits are defined in the Annex to the corresponding EU Regulation. Based on this, low vehicle represents a road vehicle of category M1, M2, or N1 which does not exceed a CO2 emission limit of 50 g/km and 80% of the emission limits for air pollutants in actual traffic.

But what about when more than one vehicle is provided to an employee during a calendar month? Let's look at two different scenarios.

  1. If the employee uses multiple vehicles consecutively during the month, the employer will tax the vehicle with the highest EP and apply 1% or 0.5% EP depending on the 'type' of vehicle.
  2. Where more than one vehicle is provided to an employee at the same time, the employee will be credited with the income of the aggregate EPs of all vehicles. For these purposes, the aggregate sum will then be calculated separately for low-emission vehicles and for other vehicles. 

Finally, it is worth adding that a low emission vehicle may be taxed on the side of the employee in payroll for the month of July 2022 at the earliest, but the change applies to the whole of 2022 and will then be reflected in the tax calculation retrospectively in the employee's annual payroll reconciliation or tax return.

So-called extraordinary depreciations extended even for 2022

We would also like to inform you that the possible application of the extraordinary depreciations that could be used in 2020 and 2021 for tangible assets classified in the first and second depreciation group has been extended even for 2022. For the sake of completeness, this type of tax depreciation can be used by the first owner on a straight-line basis without interruption, starting depreciation in the month following the date of putting the asset into use, up to 100% of the entry price over a 12-month period in case of assets in the first depreciation group. For assets in the second depreciation group (e.g., cars, other motor vehicles, trailers, semi-trailers, etc.), depreciation is applied over 24 months, with 60 % of the entry price being applied for the first 12 months and 40 % of the entry price for the remaining 12 months. Thus, the company will be able to apply the tangible assets to costs in 1, resp. 2 years instead of the usual 3, resp. 5 years.

Travel allowances

Lastly, we would like to inform you about changes to Decree No. 511/2021 Coll. with effect from 20 August 2022, which amended the rates of travel reimbursements. As a response to the actually soaring prices, the average price of petrol for the purposes of providing travel allowances has been increased. Simultaneously, the increase in meal allowance rates has been introduced, since the inflation impacted also food prices.

Reimbursement for fuel consumed

  • Petrol 95 - CZK 44.50 (unchanged)
  • Petrol 98 - CZK 51.40 (from previous CZK 40.50)
  • Diesel - CZK 47.10 (unchanged)

Meal allowances rates for domestic business trips

  • 120 CZK - 142 CZK for a business trip of 5-12 hours
  • 181 CZK - 219 CZK for a business trip of 12-18 hours
  • 284 CZK - 340 CZK for a business trip longer than 18 hours

Tax advisory

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Andrea Kleinová
Andrea Kleinová
Certified Tax Advisor
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