On 12 March 2020, The Government of the Czech Republic declared a state of emergency, for the first time in the country’s modern history on the entire area. On 16 March, the country closed its borders, forbade the entry of foreigners and issued a nationwide curfew. While originally planned until 24 March, the measures were extended repeatedly until 17 May 2020.
In order to respond to this extraordinary situation, the government took a range of new measures to support people employed by corporations, deployed Tax-related support for businesses and individuals, and implemented a variety of additional measures to help the economy.
Regarding general obligations for all taxpayers, the government granted a wide range of exemptions:
- Waiver of fines for late submission of personal and corporate income tax returns as well as default interest for late payments until 1 July 2020.
- Waiver of income tax advance payments due on 15 June 2020 without the need to apply for it.
- Waiver of the fine for late submission of VAT Control Statement.
- General waiver of administrative fees applicable to customs.
- Waivers of penalty for late payments of real estate transfer tax returns and of default interest on late payments of immovable property tax which apply to all tax returns until 31 July 2020
- Waivers of penalty for late payments and default interest on late payments of road tax advanced payments which applies to all tax advanced payments due between 15 April 2020 and 15 July 2020.
- Waiver of VAT on free of charge supply of products, or free of charge supply of materials used in order to create the product which are included on the exhaustive list and are generally used to fight coronavirus (medical supplies etc.).
All these general measures are accompanied by the set of aids that taxpayers must apply for individually:
- Taxpayer can request individually remission of interests for late payment of tax, deferral of tax or payment of tax in instalments if they prove COVID-19 related reasons. This measure applies to all taxes, including withholding taxes, VAT, etc., and is not limited to the 2019 tax year.
- The Tax Authority admit applications for deferral of payments of payroll tax and withholding tax due in the period between 31 March and 31 August 2020 (which weren’t normally granted).
- Penalties for the late filing of VAT ledger statements can be waive if a causal relationship with the coronavirus is sufficiently proven.
The Ministry of Finance made a modification to the Income Tax Act introducing the option to utilize tax losses retrospectively for up to two years, or prospectively for up to six years. The possibility of using it retrospectively can give a chance for some companies to recover tax paid in last two years and improve cash flow quicker and more sufficient way. What’s important, tax losses cannot be claimed (or carried back) if there was a substantial change in the persons directly participating in the taxpayer’s capital or control; unless if the taxpayer proves that at least 80% of revenues after such substantial change have been generated from the same activity it can be used.
Regarding the situation on the labour area The Government of the Czech Republic conceived support to employers by the Anti-virus program which had until today three modes, A, B and C. This program aims to protect jobs with employers directly affected by government restrictions connected with COVID-19. A wage allowance is provided by the Labor Office of the Czech Republic based on an application submitted by the employer.
In case of Mode A, it is dedicated to the employee which absence is attributable to quarantine. In these circumstances the employee receives compensation of 60 % calculated from his average reduced income. In the case of business closure due to the Government´s order, the employee receives 100 % of his average salary.
Regarding Mode B, when activity is stopped because of staff cuts due to quarantine orders or childcare leave affecting more than 30% of employees, the employee is compensated at 100% of their average salary. If the outage is caused by limited available input (services, material, products) necessary for the business´ activity – the employee receives compensation of 80 % of his average salary and if the cause was the limited demand for the business´ services and products – the employee receives a compensation of 60 % of his average salary.
In May the government decided to extend those modes until the end of August 2020 and also approved the proposal of the so-called “Antivirus Programme C” which should be targeted to a wider number of employers. Under this “Antivirus Programme C” the employer’s contributions to social security for the months of June, July and August 2020 should be waived in the form of a reduction in the employer’s assessment base. The bill also sets a limit for the assessment bases of individual employees. If the employee’s assessment base exceeds 1.5 times the average wage determined in accordance with Section 23b Paragraph 4 of the Premium Act the premium will be waived only from the part of the wage that falls within the limit.
Additionally, to the ones above, there is a large number of economic stimulus measures in order to avoid cash flow problems and protect the most affected sectors:
- Export Guarantee and Insurance Company provides guarantees to large companies with more than 250 employees
- Possibility of interest-free financing for self-employed people and small and medium-sized enterprises affected by COVID-19
- COVID2 program which allows National Bank to give interest-free loans up to CZK 5bln and allows commercial banks to provide guarantees for company loans up to CZK 5bln.
- As the first programmes excluded Prague, the new one similar to COVID2 programme, will be available for companies in Prague with the budget about 4-5 billion CZK.
- The Czech National Bank has decided to lower key interest rates to 0,25%.
As we can appreciate, the spectrum of all measures undertaken by the government in Czech Republic is quite impressive and covers a lot of aspects regarding the business area. However, on the social ground, the country wasn´t so restrictive as other from the area, the decision was to react strongly and rapidly in order to avoid the broad economic impact of pandemic disease. The near future will show the efficiency and accuracy of all actions made.
In Auxadi we are experts in providing value added services in accounting, tax compliance and international payroll management. We work every day to keep up to date with all legislative developments at an international level, which is crucial in extraordinary and uncertain times such as the ones we are experiencing. If you need to expand on what is set out here, please do not hesitate to contact us.