The Ministry of Labour and Social Affairs (MoLSA) has submitted a bill on the so-called Single Monthly Employer Reporting (SMER) as part of the digitalisation of the state administration. The Ministry of Labour and Social Affairs, together with the Ministry of Finance, hopes to simplify the administration for employers by having employers submit the JMHZ to the Czech Social Security Administration (ČSSZ) once a month instead of approximately 25 different reports. The MoLSA would then forward the relevant data to other state administration bodies. This is a major change, as the state administration will now have individualised data on employees and their dependent activities, as opposed to the current mostly aggregated data for employers.
Employers should submit the JMHZ by the 20th day after the end of the month in question, for the first time for January 2026 by 20 February 2027 to the CSHZ. The JMHZ is to be filed electronically on a mandatory basis, so major modifications to payroll software will be required. For smaller employers, the option of using the electronic application of the CSSA portal will be available. The data will then be automatically processed and communicated to the authority that has defined the data. This should eliminate the duplication of communicating similar data to different authorities through a large number of forms with different deadlines.
However, health insurance companies are not involved in the project, so the obligations towards them for employers (registration, notification of changes, summary of premiums) will probably remain beyond the scope of the JMHZ.
At the same time, the Financial Administration is preparing an application for pre-filling tax returns with data obtained from JMHZ, or the possibility of continuous viewing of personal tax account on the portal my taxes by employees.
For offences in the form of non-compliance with the obligations set out in the Act on the Uniform Monthly Employer Reporting, the CSSA will be entitled to impose relatively significant fines.
However, the proposed amendment also contains one fundamental change to the Income Tax Act, namely the abolition of withholding tax on income from employment. The 15% withholding tax on income from employment is currently applied in the case where the employee does not make a taxpayer declaration for income from small-scale employment (income below CZK 4,500 per month) or income from agreements on the performance of work (FTE, income below CZK 11,500 per month). The 15% withholding tax is also applied to the income of natural persons, members of corporate bodies (e.g. managing director) - Czech tax non-residents. These incomes should now be part of the normal tax base and thus subject to progressive tax rates.
The amendment provides for the abolition of withholding tax for DPP and small-scale employment from 1 January 2027. This may lead to a more substantial expansion of the range of employees who are obliged to file tax returns. In fact, if similar income is not subject to withholding tax but to advance tax, employees may be obliged to file a tax return on account of small earnings.
The abolition of the withholding tax on the income of members of corporate bodies, Czech tax non-residents, is expected to take place as early as 1 January 2026. The very significant impact here is that such income will be subject to progressive taxation (tax rate of 15% up to 36 times the average wage and 23% above this threshold). If the progressive taxation threshold is exceeded for a given year, these non-tax residents would be required to file a tax return.
The draft law is at the beginning of the legislative process, currently in the comment procedure, and some changes in its wording can be expected. We will monitor further developments for you.
Autor: Monika Lodrová
Basic aspects of the JMHZ project
The project of the single monthly employer's report as the first stage of the single collection point involves the Ministry of Labour and Social Affairs, the Czech Social Security Agency, the Labour Office, the Czech Statistical Office and the Financial Administration. Each of the authorities has defined the data it needs for the performance of state administration in a given area. In total, there may be up to approximately 400 data points. Thus, the state administration will now have individualised data on employees on a monthly basis. In particular, this should include information on employee income, tax deposits withheld, discounts applied, insurance premiums, corrections made to levies, results of the annual settlement of tax deposits, etc. At the same time, the JMHZ should contain aggregate data for employers such as total insurance premiums, total withheld advances or number of employees, again on a monthly basis. The format and content structure of the JMHZ will be determined by a regulation of the Government of the Czech Republic. The CSSA will then publish the data structure of the report.Employers should submit the JMHZ by the 20th day after the end of the month in question, for the first time for January 2026 by 20 February 2027 to the CSHZ. The JMHZ is to be filed electronically on a mandatory basis, so major modifications to payroll software will be required. For smaller employers, the option of using the electronic application of the CSSA portal will be available. The data will then be automatically processed and communicated to the authority that has defined the data. This should eliminate the duplication of communicating similar data to different authorities through a large number of forms with different deadlines.
However, health insurance companies are not involved in the project, so the obligations towards them for employers (registration, notification of changes, summary of premiums) will probably remain beyond the scope of the JMHZ.
At the same time, the Financial Administration is preparing an application for pre-filling tax returns with data obtained from JMHZ, or the possibility of continuous viewing of personal tax account on the portal my taxes by employees.
Registration of employers and employees, penalties for non-compliance
In order to be able to communicate data through the JMHZ, employers will have to be registered as employers with the ČSSZ (employer register). Employers will be obliged to register all their employees (including from uninsured activities) in the register of employees kept by the CSSA. Once registered in the register of employees, the employee will be assigned a social security number, which will be unique for each employee and unchanging for further employment. An employment identifier will then be assigned to each employment.For offences in the form of non-compliance with the obligations set out in the Act on the Uniform Monthly Employer Reporting, the CSSA will be entitled to impose relatively significant fines.
Proposal to abolish withholding tax on income from employment and related effects
In connection with the introduction of the JMHZ, the legislator proposes amendments to related laws. Some of these changes are logical consequences of the introduction of the JMHZ (abolition of various types of notifications, reports and statements, introduction of new registers, abolition of the obligation to register the taxpayer, postponement of the deadline for the application for the annual settlement, etc.)However, the proposed amendment also contains one fundamental change to the Income Tax Act, namely the abolition of withholding tax on income from employment. The 15% withholding tax on income from employment is currently applied in the case where the employee does not make a taxpayer declaration for income from small-scale employment (income below CZK 4,500 per month) or income from agreements on the performance of work (FTE, income below CZK 11,500 per month). The 15% withholding tax is also applied to the income of natural persons, members of corporate bodies (e.g. managing director) - Czech tax non-residents. These incomes should now be part of the normal tax base and thus subject to progressive tax rates.
The amendment provides for the abolition of withholding tax for DPP and small-scale employment from 1 January 2027. This may lead to a more substantial expansion of the range of employees who are obliged to file tax returns. In fact, if similar income is not subject to withholding tax but to advance tax, employees may be obliged to file a tax return on account of small earnings.
The abolition of the withholding tax on the income of members of corporate bodies, Czech tax non-residents, is expected to take place as early as 1 January 2026. The very significant impact here is that such income will be subject to progressive taxation (tax rate of 15% up to 36 times the average wage and 23% above this threshold). If the progressive taxation threshold is exceeded for a given year, these non-tax residents would be required to file a tax return.
Examples of forms that should be gradually replaced by the JMHZ
- Statement of work performance agreements (introduced 1 July 2024)
- Notification of employment (ČSSZ)
- Summary of social security contributions including employer's premium discount
- Pension insurance record sheet
- Confirmation of taxable income from employment
- Accounting for tax on dependent activities levied in the form of advances
- Income tax withholding tax at the special tax rate
- Reporting of the compulsory share of persons with health insurance
- Information on the entry into employment of EU/EEA and Swiss nationals or their family members, or foreign nationals who do not need a work permit
The draft law is at the beginning of the legislative process, currently in the comment procedure, and some changes in its wording can be expected. We will monitor further developments for you.
Autor: Monika Lodrová