Motivating and retaining employees is among the biggest challenges in today’s labor market. In addition to wages, companies are increasingly relying on employee benefits, which can significantly influence employee satisfaction and loyalty. However, the way benefits are structured is crucial – to truly be effective, they must be attractive to employees while remaining simple and tax-efficient for employers. Since 2024, a new option has emerged in the Czech Republic that meets both of these requirements: the Long-Term Investment Product (DIP).
The Long-Term Investment Product is a legal framework that allows individuals to invest funds in selected financial instruments, such as mutual funds, stocks, or bonds, with significant tax advantages for both employees and employers. DIP is another state-supported form of retirement savings, similar to pension insurance or life insurance, but it offers greater flexibility and a wider range of investment opportunities.
The time horizon: funds in a DIP can be withdrawn without penalty only after 10 years of the contract and, at the same time, not before the participant reaches the age of 60.
Tax support: state support for DIP is indirect, as the state does not contribute funds directly to the employee. Instead, support is provided through tax advantages for both the employee and the employer.
No co-contribution required: employees can use contributions from their employer, contribute their own funds, or both. Personal contributions, however, are not required to benefit from tax advantages.
Tax deductibility: employer contributions to DIP are tax-deductible, similar to pension or life insurance contributions. The limit for this contribution is CZK 50,000 per year, which applies collectively to all retirement savings products (pension savings, life insurance, and DIP).
Simple administration: the contract is arranged by the employee, and the employer only needs to transfer the contribution regularly. From the perspective of HR or accounting, this is a process with minimal administrative burden.
Attractive benefit: the option to contribute to a DIP expands the portfolio of benefits considered long-term and valuable. In a competitive environment where companies compete to provide attractive perks, this benefit can serve as a “modern” alternative to traditional products.
ax advantages: employees can deduct their own contributions from their taxable income up to CZK 48,000 per year. Tax savings can therefore reach several thousand crowns annually, depending on the level of contributions. This limit applies collectively to all retirement savings products.
Investment flexibility: unlike other state-supported retirement savings products, DIP offers a wider range of investment options, allowing individuals to adjust risk and potential returns according to their preferences. They can also change their strategy over time and transfer funds between investments within the DIP.
Early withdrawal: if an employee needs the funds earlier, they can withdraw them. However, if the time horizon is not met, previously granted tax benefits must be repaid.
Pension savings and life insurance remain relevant tools, especially for more conservative clients. DIP, on the other hand, opens the door to more dynamic investments and modern ways to grow wealth. It is important to remember, however, that all three products share a single tax limit. Both the employee and the employer must therefore consider carefully how to allocate contributions among them.
The Long-Term Investment Product combines tax advantages, simple administration, and flexible investment options. For employers, it represents a tax-deductible cost and also a benefit that is attractive and distinguishes the company in the competition for qualified employees. If your company already uses employee benefits as a tool for motivation and retention, it is important to ensure they are structured correctly from both a legal and tax perspective. We would be happy to assist you with setting them up, preparing the necessary contractual and internal documentation, and communicating them effectively to employees.
