Anti-crisis regulations in the Czech Republic

We present the key issues of the anti-crisis programme covering aid solutions for entrepreneurs and the economy aimed at mitigating the negative economic consequences of the COVID-19 pandemic. Moreover, we indicate other possible actions that entrepreneurs can take proactively to secure their businesses.

TAX LAW

• General waiver of fine for late submission and default interest for late payment in respect of corporate and personal income tax including WHT (for tax returns for the 2019 tax period with an original filing deadline of 1 April 2020 if submitted/paid by 1 July 2020)
  
  
• General waiver of personal income and corporate income tax advance due on 15 June 2020 (only for taxpayers with a tax period identical to the calendar year; in other cases, taxpayers may submit an individual application to decrease or cancel obligation in respect of payment income tax advances).
  
  
• General waiver of fine for the late filing of VAT ledger statement (only for those filed late between 1 March and 31 July 2020;  n/a for statements filed late based on the call of tax office or if not filed at all – in these cases the waiver is subject to an individual request).
  
  
• Individual waiver of fine for late submission and default interest for late payment in respect of VAT.
  
  
• General waiver of administrative fees in relation to requests for defer of tax payments or for payment of tax in instalments (if approved, the interest can be waived), and also in relation to requests to waive a fine for failure to submit a VAT Ledger Statement (in the amount of CZK 10,000, 30,000 and 50,000) - for requests submitted by 31 July 2020.
  
  
• General waiver of fine for late submission and default interest for late payment in respect of tax on acquisition of immovable asset (if submitted/paid by 31 August 2020).
  
  
• Road tax advances due on 15 April and 15 July 2020 are postponed to 15 October 2020.
  
  
• Introduction of the Loss carry-back concept, i.e. retroactive effect of tax loss generated for 2020 in the 2018 and 2019 tax periods (via filing additional personal/corporate income tax returns for 2018 and 2019). This change is subject to an amendment of Income tax law.

Self-employed persons

• Extension of the deadline for filing the Social Security and Health Insurance Overviews for 2019 until 3 August 2020 (the deadline for payment of outstanding insurance remains 8 days of filing).
  
  
• Waiver of the advance payments for social insurance in the months of March to August 2020 in the full amount (regardless of the amount of advances that shall be due).
  
  
• Waiver of the advance payments for health insurance in the months of March to August 2020 in the minimum amount, i.e. in the amount of CZK 2,352/month (i.e., only the advance above this amount will be due per month).
  
  
• Financial one-off support of CZK 25,000 for all self-employed persons whose business was affected by regulations relating to COVID-19. The support is available to all self-employed persons performing the activity as of 12 March 2020 with the exceptions to those carrying out the business activity simultaneously with their employment. The receipt of applications shall be launched once the legislative process is finished, assumingly by 15 April 2020 at the latest.
  
  
• Self-employed person can apply for allowance for taking care of children (CZK 424 per day), even if the person does not participate in sickness insurance, if the business activity cannot be performed due to the care of a child under 13 years (or 26 years if dependent at least in grade I) attending school or other childcare facilities that have been closed. Similarly, the self-employed person can apply for the allowance for taking care of another person who is dependant and cannot temporarily attend the social facility due to its closure.

   

  HOW CAN WE HELP?

• Verifying the possibility of using special regulations
• Support for the drafting of requests to Tax office for tax deferment or payment in instalments
• Support for the drafting of requests to Tax office for waiver of sanctions in respect of late payments or submissions
• Support to self-employed persons with applications for financial one-off support or for allowance for taking care of children

   

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  LABOUR LAW

• The government has adopted several regulations to support employers, employees and the self-employed in the coronavirus pandemic in order to retain employees – e.g., Antivirus programme detailed below.
  
  
• Currently, there is no extension granted in respect of payments of payroll tax and/or social security and health care insurance contributions. It is possible to apply for payment in instalments and potentially to waive sanctions for late payments but the decision will depend on the individual assessment of the respective authority.
  
  
•  Employees are entitled to allowance for taking care of children under 13 years (or dependent at least in grade I without any age limit) for the entire period of closing schools and other childcare facilities. Similarly, the employees are entitled to allowance for taking care of another person who is dependant and cannot temporarily attend the social facility due to its closure.
  
  
  Antivirus programme
  
  Through Antivirus programme, employers whose business activity is directly or indirectly affected as a result of the pandemic can claim compensation from Labour Office for wage costs in respect of their employees.
  
  The amount of compensation to employers is derived from the average super-gross wage, including mandatory insurance contributions (CZK 48,400) and depends on the reason for the occurrence of an obstacle at work on the side of employer when the employee is entitled to receive a certain percentage of the  average earnings. Employers will be able to submit an application for compensation to the Labour Office in two regimes:
  
  
  Regime A. - Forced limitation of business operation and quarantine
  Closure or limitation of business operation based on the emergency measure or an order of the quarantine by a competent office

• In the event of ordered quarantine, the employee receives a wage compensation amounting to 60 % of the reduced average earnings
• In the event of closure of business due to the Government order, the employee receives a wage compensation of 100 % of the average earnings
• Contribution to the employers amounting to 80 % of the wage compensation paid, including contributions / up to the amount of CZK 39,000

  
  Regime B. - Connected economical difficulties
  Obstacles to work on the part of an employer due to the connected economical difficulties because of the spread of the coronavirus

• Obstacles to work on the part of an employer due to the ordered quarantine or childcare for a significant proportion of employees (30 % or more) — the employee receives a wage compensation of 100 % of the average earnings
• Limitation of the availability of inputs (raw materials, products, services) necessary for the activity — the employee receives a wage compensation amounting to 80 % of the average earnings
• Reduced demand for services, products and other products of the company — the employee receives a wage compensation amounting to 60 % of the average earnings
• Contribution to the employers amounting to 60 % of the wage compensation paid, including contributions / up to the amount of CZK 29,000 
  
  Conditions for the entitlement to the compensation:

• It concerns companies in the business sector, employees have to be in the employment relationship and must participate in sickness and pension insurance;
• the employer has to strictly comply with the Labour Code;
• the employee cannot be within the period of notice and must not be given notice;
• the employer has to pay the wage to employees and pay all the statutory payments (payroll tax, insurance contributions).
  
  The employer may apply for payment of compensation after the reporting period, i.e. at the beginning of the following month. Applications are accepted starting 6 April 2020.
  
  The period of eligibility is currently in force from 12 March 2020 to 30 April 2020, however, it is expected that the period will be extended to 31 May 2020.

HOW CAN WE HELP?

• Verifying the possibility of using special regulations
• Support for the drafting of requests to Tax office and Social security and Health insurance office for payment in instalments or for waiver of sanctions for late payments
• Support for the drafting of application to Labour Office within Antivirus programme.

   

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  OTHER

• Electronic evidence of sales (EET) - the last wave which was due to come into effect on 1 May 2020, was suspended for an emergency period and for the following 3 months. At the same time, the EET obligations for entities and entrepreneurs falling into previous waves without any enforcement have been abolished. The suspension also applies to the so-called special EET regime. However, taxpayers are obliged to have all the statutory requisites handled 3 months after the end of the emergency period.
  
  
• Interest free loans for small and medium-sized entrepreneurs and companies with delayed repayment of the loan within program COVID I (currently the receipt of applications within COVID I was suspended due to using up of the budget).
  
  
• Guarantee for loans for small and medium-sized entrepreneurs and companies within program COVID II to finance wage and energy costs, rent payments, payment of invoices, pre-financing of receivables, acquisition of property, inventory and other small assets. The loans provided by commercial banks will be guaranteed by Czech-Moravian Guarantee and Development Bank for up to 3 years up to 80 % of the loan, the loan is max. up to CZK 15 mil. Further, the interest will be reimbursed up to CZK 1 mil. The first round of applications was already closed, the further round will be announced 10 days after the 1^st round is handled.
  
  
• Moratorium on repayment of loans and mortgages arranged prior 26 March 2020 binding for all banks and non-banking companies. Debtors (individuals as well as companies) can interrupt their repayments for 3 or 6 months. The repayments are deferred upon notification of debtor to its creditor where debtor announces that the deferment is due to the negative economic result of coronavirus pandemic. The interest will remain in the agreed amount.
• Impossibility to terminate the lease - the lessor shall not be entitled in the protection period to terminate the lease in respect of premises used for living solely on the grounds that the lessee is in delay with the payment of rent in the decisive period (12 March to 30 July 2020) due to the lessee´s difficult financial situation in relation to coronavirus pandemic. The due rent must be repaid by 31 December 2020. Further, the lessee will be entitled to defer the repayments of loans granted by State fond of living development up to 30 November 2020. The similar regulation will be applied in respect of commercial premises in case the lessee will be in difficult financial situation due to drop-out in revenues. The due rent must also be repaid by 31 December 2020. This regulation is subject to legislation update and will be effective as of the publication in the Collection of Laws.

HOW CAN WE HELP?

• Legal advisory on the use of existing and new government regulations on coronavirus
• Development of a plan of preventive and corrective actions to secure business continuity