uncovered costs

COVID Uncovered Costs

Author: Jiří Žvachta
uncovered costs
It seems that the COVID-19 pandemic finally steps back but still, we will face its consequences for a long time. To moderate the impact on business, new supporting programmes were announced in April 2021. In this article, we would like to introduce you one of them in more detail.

The new supporting programme “COVID uncovered costs“ was announced on 1 April 2021. Application to this programme can be submitted in the period of 19 April 2021 and 19 July 2021. The purpose of this programme is „ to prevent the deterioration of the capital situation of entrepreneurs, keep business going and provide a basis for recovery“. Unlike previous programmes, this programme is not limited to only some selected sectors. All entrepreneurs are authorized to apply – both individuals as well as corporations, which are running their business under Act No. 455/1991 Coll. if other conditions are met.

The primary condition is similar to those for compensation bonus, i.e. decrease in turnover by more than 50%. Turnover means turnover for the decisive period which is the period from 1 January to 31 March 2021.  Turnover for the decisive period is compared, similarly as in the case of the compensation bonus, with the comparison period. That period is, based on the applicant’s decision, either 1 January 2020 to 31 March 2020, or 1 January 2019 to 31 March 2019. The turnover is calculated for the applicant’s whole business activity. For example, if a corporation runs wholesale that has not been affected and retail activities in the same volume as a wholesale with a turnover drop of 80 %, the total decrease is “only“ 40 % and thus the applicant is not authorized to apply.

Another condition for obtaining the support is that the applicant will be at a financial loss within the decisive period. The loss must be proved by the Profit and Loss Statement, based on interim closing. However, some other limitations apply for the preparation of the Profit and Loss statement such as only including costs under the Income Tax Act.

Calculated loss is further adjusted, by received or expected subsidies, in order to avoid double payments for the same costs/expenses. Adjusted loss is defined as “uncovered costs” which we do not consider as a suitable definition; some resources even use „uncovered fixed costs“ which is completely misleading. However, using all available resources, it is obvious what “uncovered costs“ mean. These uncovered costs are at the same time eligible expenditures, out of which 60 % is refunded to „ordinary“ applicants. In case the applicant is (partially) owned by the government or regional municipalities, only 40 % is refunded. The maximum subsidy possible is CZK 40 mil. per applicant.

It is necessary to mention that the program has several other limitations and its conditions are much more complicated, especially due to the possible necessity of audit of the Profit and Loss statement, audit of documentation in the case of individuals, exclusion of costs covered by other programmes etc.

Taking those above-mentioned issues into consideration, we would like to invite you to our webinar to provide you with more detailed information. The webinar will be conducted online on 12 May 2021 in the Czech language. Follow our social media where we publish links and all necessary information related to the webinar. We are looking forward to meeting you soon, at least virtually.

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