PwC Legal and Tax Services

We are monitoring for you the news concerning government regulations and amendments to acts associated with the Covid-19 pandemic.

Law and State Aid

  • Employer’s obligations during the quarantine and compensation by means of reimbursement of wage
  • State aid options for small and medium-sized enterprises - loans, state guarantees and so on
  • Labour-law instruments for employers to solve the current crisis - holidays, unpaid leave and so on

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Taxes and Insurance

  • Possibility for all taxpayers to submit the Income Tax declaration by 1 July 2020
  • Implementations of “loss carryback” - option to apply tax loss to the tax returns for years 2019 and 2018
  • Time limit for submitting VAT reports or time limit for tax payment has not changed; possibility of exemption from penalty for late submission or from late payment interest

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Law and State Aid

Labour Law

Last update: 1 June 2020

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As an employer, you are required to pay 60% of the daily assessment base to your employees for the first 14 days of quarantine. After 14 days, employees receive sickness benefits from the Social Security Administration. From 6 April 2020, you may request compensation from the state for these costs (i.e. the wage compensation for the first 14 days of quarantine). All information is provided electronically through the Labour Office, and the amount of compensation should amount to 80% of the paid wage compensation, including social security advances, but only up to a maximum of CZK 39,000.
If the nature of the employee's work allows it and the quarantine conditions are not violated, you can also agree with the employee that he/she will work from home. In this case, however, the employee is entitled to the normal wage. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

Unless you use other tools provided by the Labour Code, employees are entitled to 100% of their average earnings due to obstacles to work on the part of the employer since you do not allocate them work.
However, in accordance with the Government decision, you might be entitled to a compensation of 80% of the wage compensation thus paid, including social security advances, up to a maximum amount of CZK 39,000 per employee per month. All information is provided electronically through the Labour Office. The applications are being submitted from 6 April 2020. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

In relation to employees who will receive wage compensation as a result of a work obstacle, from the standard 100% of the average earnings, the claim may be made for compensation in the amount of 60% of wage paid, including social security advances up to a maximum amount of CZK 29,000 per employee per month. All information is provided electronically through the Labour Office. The applications are being submitted from 6 April 2020.
Nevertheless, you may also use other tools provided by the Labour Code for these employees. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

If an employee cannot be transferred to another job and continue to work, such a situation may be considered downtime in exceptional cases. The employees are entitled to 80% of their average earnings, paid by the employer. According to a current Government proposal, the employer might be entitled to receive 60% of the above amount as compensation from the state, including social security advances, up to a maximum amount of CZK 29,000 per employee per month. All information is provided electronically through the Labor Office. The applications are being submitted from 6 April 6 2020.
You may also use other tools provided by the Labour Code for these employees. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

It is possible to use so-called partial unemployment when employees cannot work within the scope of weekly working hours (fully or partially). To the extent that the employees do not work, they are entitled to wage compensation in the amount of 60% of their average earnings, paid by the employer. If a trade union operates in your company, it is necessary to agree with them on the terms of this regime. If you do not have trade unions, you only need to issue an internal regulation.
The employer will be entitled to receive 60% of the above amount as compensation from the state, including social security advances, up to a maximum amount of CZK 29,000 per employee per month. All information is provided electronically through the Labour Office, starting 6 April 2020. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

Unless you use other tools provided by the Labour Code and conditions such as downtime or partial unemployment are not met, your employees are entitled to wage compensation in the amount of 100% of their average earnings. There is currently no system of state compensation for these costs. However, it can be assumed that your business will be affected sooner or later to such an extent that you may benefit from the above schemes such as downtime or partial unemployment and the associated compensation mechanisms. The same is true if your company/operation is only partially open.

The employer will be entitled to receive 60% of the above amount as compensation from the state, including social security advances, up to a maximum amount of CZK 29,000 per employee per month. All information is provided electronically through the Labour Office, starting 6 April 2020. The period during which employers will be reimbursed for costs incurred in connection with compensation of wages, including mandatory contributions, should be extended by 31 August 2020.

Firms employing up to fifty employees may look forward to the planned extension of program “Antivirus”. The support should consist of cancelation of social security contributions paid by an employer. Such new program, which will be conditioned by preserving the jobs and the value of wages in the extent of 90% at least compared to the value in March 2020. It should relate to a period between June and August 2020. The respective proposal is actually within the legislature process and its final version, if passed, should be introduced in the course of June 2020.

1. Collective holiday. Zaměstnavatel může určit hromadné čerpání dovolené pro všechny své zaměstnance nebo jejich část (např. jen pro některé provozy nebo provozovny).
The employer may determine collective holiday for all or part of its employees (e.g. only for certain undertakings or premises). The provision must be in writing and delivered to the employee at least 14 days before the start of the holiday (this may be shortened by an agreement). The legitimate interests of the employee must be taken into account (e.g. childcare). The length of the holiday taken must not exceed two weeks. It is, of course, possible to determine holidays for employees only on an individual basis. Early termination of the holiday before the end of the specified period is possible, but the employer bears the risk of reimbursement of costs to the employee. However, due to the constraints of the current state of emergency (travel prohibition, etc.), we do not expect there to be extremely large reimbursement costs.
2. Unpaid leave and paid leave. Upon agreement with the employee, it is possible to take unpaid leave. We also recommend arranging the payment of health insurance with the employee. Of course, it is also possible to pay salary compensation to employees amounting to 100% of average earnings without assigning them work.
3. Temporary assignment of employees to another company. If you do not have workload for your employees and you do not want or cannot use any other available options, but another company urgently needs workers, you may use the institute of temporary assignment. Under certain conditions, it is possible to arrange with an employee work for another company while he remains in your employ. The other company will then reimburse your costs, which are still borne by your company as the employer (wages, insurance, etc.).
4. Home office. If the nature of the work allows it and you are able to ensure your activity through home office, you may agree on this form of work with the employee. However, it is not possible to oblige employees to work from home. When introducing home office, it is particularly important to effectively secure (e.g. through internal regulations): assignment of work, submission and revision of work (by the employees), a schedule of working hours to be kept by employees, records of working hours, health and safety requirements, protection of the employer’s work equipment, and/or the reimbursement of costs incurred from home office work (or arrangement of lump sum compensation).

5. Compensatory time off for overtime and public holidays. For work overtime or public holidays, it is possible to take compensatory time off instead of overtime pay. Unless you have directly negotiated overtime pay for these work regimes in your employment or other contracts, you may, in principle, determine an obligatory compensatory time off for overtime or holiday, up to three months retrospectively.
6. Working hours account and changing shifts. In specific cases, shifts can be changed for employees so that employees work only in the period when there will be actual work for them, or it is possible to use the working hours account. In this context, it is of course necessary to comply with the limits set by the Labour Code, especially the length of shifts and rest during the working week and after shifts. These measures shall, however, only be implemented in the short term.
7. Part-time work and wage reduction. In the current crisis situation, it is of course possible to reduce workload and reduce wages. However, the obstacle is that, in principle, both the employer and the employee must agree to this. A certain exception is a reduction in the wage determined in the salary statement or in internal regulation, whereby wages may be reduced even without the employee's consent.
8. Change of work type. In principle, it is possible to change the agreed type of work only with the consent of the employee, except for the transfer to another type of work due to an extraordinary event, or to mitigate its immediate consequences, which is possible even without the employee's consent. However, the application of such a measure requires an assessment of the specific conditions of each employer.
9. Transfer of activities and activities between two employers. Under certain conditions, you may agree with another employer to transfer the activities of a particular group of employees. Employment contracts and other rights and obligations arising from labour relations are transferred together with the transferred activity.

Taking care of a child. Entitlement to childcare is substantially extended and is newly applicable to the care of a child under 13 years of age who cannot attend school or kindergarten due to the closure of these facilities during an epidemic or quarantine order. The caretaking employee may continue to benefit from the right even after the standard nine calendar days, and in the case of a single parent, even after 16 calendar days. Entitlement to childcare arises even if it is the facility that decides to close due to an epidemic rather than a measure of the state or local authority. Taking into account the current situation, the childcare benefit may be used during the entire period of extraordinary measures, including retrospectively. Parents will be able to rotate during childcare more than once, as needed. Childcare allowance in the amount of 60% of daily assessment basis was stipulated until 31 March 2020 and 80% of daily assessment basis as from 1 April 2020. Under certain conditions, childcare allowance will be provided also to persons having either the agreement on performance of the work or agreement on working activity.
Limitation of activity due to illness and quarantine. In the event of an employee's illness with COVID-19 or a quarantine order (which includes limiting or closing down the facility of the employer) for the same reason, the employee is entitled to wage compensation of 60% of earnings within the first 14 calendar days. From then on, the employee receives health benefits.

State Aid

Last update: 1 June 2020

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COVID III LOAN
The COVID III program was approved by the government on 18 May 2020, is another in a series of packages designed to help entrepreneurs overcome the current crisis. Entrepreneurs will not apply for a loan guarantee to the Czech-Moravian Guarantee and Development Bank (CMGDB), but directly to a commercial bank involved in the program. Commercial banks will check the fulfilment of the conditions of the program and provide loans for which CMGDB will guarantee. The purpose of the loan is the same as in previous programs, namely, to cover operating expenses. An entrepreneur with a business license in the Czech Republic who does business in the area of supported economic activities can participate in the program. The list of supported economic activities can be found here.
The aid will be granted under the Temporary Framework for State aid measures to support the economy in the current spread of COVID 19 adopted on 19 March 2020.
The guarantee is for entrepreneurs with up to 500 employees. The loan will be covered up to 90% of the principal for companies with up to 250 employees and up to 80% of the principal for companies with 250 to 500 employees. The maximum loan amount may not exceed twice the entrepreneur's annual wage costs for 2019 or for the last available year or 25% of the entrepreneur's total turnover in 2019. In no case will the loan amount exceed CZK 50 million. As with previous programs, the guarantee period does not exceed 3 years. The loan must be concluded between 18 May 2020 and 31 December 2020 inclusive. It is already possible to start negotiations with the selected banks for the provision of a loan.
COVID II LOAN
CMGDB in cooperation with the Ministry of Industry and Trade (MIT) has prepared the continuation of the COVID I Loan program. The CMGDB will provide entrepreneurs with guarantees for loans with commercial banks and it will also contribute to the payment of interest.
Under the COVID II Guarantee Program, the CMGDB guaranteed loans of up to CZK 15 million. The guarantee covered up to 80% of the commercial loan and the applicant was able to draw on a financial contribution of up to CZK 1 million to pay interest according to the amount of the provided loan. The duration of the guarantee must not exceed three years, even if the term of the loan with the commercial bank itself is longer. The guaranteed commercial loan could only be used to cover operating expenses such as wages, rent, energy, supplier/customer invoices, materials, inventory, and other small assets. This does not include the repayment of another loan, lease or investment. Commercial banks was able to require additional collateral in addition to the ČMZRB guarantee. The guarantee was also provided by ČMZRB only for loans contracted with the so-called cooperating commercial bank, the list of which is published at www.cmzrb.cz.
Applications for this program started on 2 April 2020. The first round of receiving of the applications was closed on 3 April 2020 at 23:59 a ČMZRB is actually contacting particular applicants and assessing their applications. The next round of the program will be announced, based on the decision of the Ministry of Industry and Trade, in the upcoming days. As this is an EU-funded program, small and medium sized enterprises established in the city of Prague are excluded (see below).
COVID PRAHA LOAN
The CMGDB prepared in cooperation with the Capital City of Prague the COVID Praha program intended for financing projects of small and medium-sized enterprises that are located in Prague. This is a de facto addition to the COVID II program, in which these entrepreneurs could not participate. The aid was granted in the form of a commercial loan guarantee and a financial contribution to the interest rate. As with the COVID II program, the use of the loan is limited to financing the operating expenses such as rent, wages or energy. Only non-agricultural activities could be supported by this program.
The guarantee was provided for loans up to 80% of the principal of the guaranteed loan of up to CZK 15 million. The duration of this guarantee cannot exceed 3 years. The guarantee was provided by ČMZRB again only for loans concluded with so-called cooperating banks (the list is published at www.cmzrb.cz). The total amount of the financial contribution was graduated depending on the amount of the guaranteed loan, but in no case it could exceed CZK 1 million.
Applicants must have complied with the terms and conditions of the COVID Praha Program Call.
Filing of the applications launched on 21 April 2020 and its capacity was exhausted in ten minutes. Based on this, the filing of applications was already finished.

COVID I LOAN
The CMGDB had offered entrepreneurs running small and medium-sized businesses preferential loans in the amount of CZK 500 thousand and up to CZK 15 million with a zero percent interest rate. The loans offered amounted to up to 90% of eligible expenditure, with a maturity of two years, including the possibility of deferred repayment for up to 12 months. This program is currently suspended from 20 March 2020; about half of the applications have been already evaluated. However, most applications were rejected. A frequent mistake was the overestimating of the applicant's financial situation and non-compliance with the terms of the program.

Program COVID +
The Ministry of Finance, the Ministry of Industry and Trade and the Export Guarantee and Insurance Corporation (EGAP) have developed a program to provide a system of repayment guarantees for exporters and producers, also known as Guaranty COVID +. Unlike COVID and COVID II, it aims to support larger companies that are adversely affected by the coronavirus crisis. Under this program, EGAP will provide guarantees for repaying the principal of loans for operating, working capital, innovation, the improvement of production and for sustaining the business. The scope for EGAP's insurance activities has been expanded as well; its insurance capacity has recently been increased to CZK 330 billion.
The purpose and scope of guarantees, the conditions for their provision, the procedure for disbursing funds from the state budget and other specific aspects of this program were set out in Government Decree No. 215/2020 Coll., on the implementation of certain provisions of the Act on Insurance and Financing of Exports with State Aid. Guarantees will be provided to Czech exporters and producers with more than 250 employees whose share of total annual turnover were exports reaching at least 20% in the last accounting period, or in the year 2019. Guarantees will be granted for specific purposes, in particular the financing of production for export, including the funding of costs already incurred. Guarantees cannot be provided in certain areas of predominant economic activity such as land and pipeline transport, air, water transport, accommodation, travel agency activities, gaming, casino and betting agencies.
The guarantee will be issued by the end of 2020. ..Financing provided by the crediting bank to exporters or producers should amount to a maximum of 25% of turnover or sales for 2019 (but at least CZK 5,000,000). Also, the creditworthiness of the exporter or producer should not be less than grade B- according to the EGAP rating scale. It will be possible to provide a guarantee of up to 80% of the loan principal if the evaluation of the company by EGAP's internal rating is better than grade B-. If the company is assessed by EGAP's internal rating corresponding to grade B-, the guarantee can only be provided up to 70% of the loan principal. The part of the loan principal, the repayment of which is not guaranteed, will be borne by the lending bank. Therefore, the program is designated for companies that did not have financial problems before the current crisis. Please note that there is no legal entitlement to the warranty.
The launch of the COVID + guarantee was subject to the approval of the European Commission. The program received approval and is already running. However, those interested do not apply for a loan directly to EGAP, but to their bank. The Bank evaluates whether the guarantee criteria are met and then applies to EGAP with a request for a guarantee for the loan.

Program COVID +
If you operate in rented premises (intended for business) and if the operation of your business was prohibited by government measures, you will be able to use funds to partially offset rental costs from a grant program announced by the Ministry of Industry and Trade.
Typical eligible recipients of the subsidy will be, for example, restaurant operators (even if they provided take away services the state of emergency), tenants of retail premises in shopping centres or operators of hotels, sports grounds, cultural or educational institutions, provided that they rent the premises.
The condition for obtaining a subsidy, which will amount to 50 % of the rent, is, considerable assistance from the landlord, namely the provision of a discount of 30 % of the rent, which is to be paid for April to June. From the landlord's point of view, it will be a contribution of not even one month's rent.
After providing a discount and obtaining a subsidy, the landlord will pay 20 % of the rent (note: the discount, and even more so the subsidy will probably not relate to the cost of services or other service fees paid under the lease or VAT). From the landlord's point of view, it will be a contribution of not even one month's rent.
In order to draw the subsidy, it will be necessary to prove the existence of the lease agreement (which was concluded before 12 March this year), submit the amendment to the lease agreement (on the rent discount), rent and VAT payment confirmation.
The subsidy can be provided in the maximum amount of CZK 10,000,000 per entrepreneur (regardless of the number of establishments). The subsidy will not apply to rents between related parties. The discount on the lease of premises leased by public entities is automatically set at 80 %. The grant program should be announced in June, . therefore, we can recommend starting negotiations with the landlord in order to obtain the discount.
Finally, we remind you that if you were in arrears with the payment of rent for business premises from March to June this year due to the restrictions resulting from the emergency measure during the pandemic, this is not a reason for termination. More here

Although the European Union (EU) has only limited competences in the field of public health protection, it seeks to mitigate the effects of the COVID-19 pandemic by other means. In recent weeks, several programmes and initiatives have been launched by the various EU bodies and institutions that aim to achieve this. These measures are very diverse, with the main ones introduced below:
  1. The European Commission (EC) has formed a coronavirus response team to combat COVID-19 which shall help the Member States take swift and effective measures to support the economy. In particular, the EC has adopted a Temporary Framework for State aid measures to support the economy in the current situation. The Framework allows the Member States to provide affected companies with selective tax advantages, advance payments or direct grants up to EUR 800,000. The EC also plans to relax the EU budgetary rules.
  2. As regards financial assistance, the EC has set up the first package of measures - a ‘Coronavirus Response Investment Initiative’ designed to support the most affected sectors of economy (the healthcare sector, small and medium-sized companies, the labour market, etc.). The EC wants to make up to EUR 37bn available via the Initiative. The Czech Republic is to receive more than EUR 1bn from this budget, which should be used for support of the above-mentioned sectors. In addition, the EC has proposed the establishment of the "Support to mitigate Unemployment Risks in an Emergency" (SURE) worth up to EUR 100 billion. This should support short-term work programs and similar measures by the Member States to protect jobs and ensure the functioning of businesses. In addition, the Solidarity Fund has been extended to public health crises, from which an additional billion euros should be made available to the Member States.
  3. The Second package from 2 April 2020 complements the first one by introducing flexibility to allow that all non-utilised support from the European Structural and Investment Funds. The Member States may request amendments to the operational programmes to enable a 100% EU co-financing rate to apply for the accounting year 2020-2021. Such requests can be made during the accounting year starting on 1 July 2020 and ending on 30 June 2021.
  4. The new EC legislative proposal should also allow EU countries to transfer EU funds between the three main cohesion policy funds. This flexibility should also apply to the transfer of funds between categories of regions and priority areas.
  5. The EC is also working to facilitate the purchase of urgently needed medical equipment and the transport of this equipment and patients in cross-border regions. The assistance amounts to € 3.08 billion from the EU budget and is to be provided through the Emergency Aid Instrument (€ 2.7 billion) and the EU reserve (€ 380 million).
  6. The European Central Bank (ECB) has launched a new asset purchase program called the Pandemic Emergency Purchase Programme (PEPP) with an overall budget of EUR 870bn. This amounts to 7,š% of the GDP of the Eurozone. The program will run at least until the end of 2020 and it is aimed at the purchase of bonds and other financial assets of the public and private sectors. The ECB will purchase assets according to the so- called “capital key”, i.e. according to the country's share in the ECB. In connection to the launch of the PEPP, the ECB announced its intention to print more than EUR 1 trillion of new money.
  7. The EU is also focused on the support of small and medium-sized companies (SMEs) and mid-caps, which will be hit hard by the current crisis. The EC will provide EUR 1bn from the EU budget as a guarantee for the European Investment Fund to encourage banks to provide liquidity to SMEs. It is expected that this measure could help at least 100,000 SMEs with funding of around EUR 8bn. In addition, the European Investment Bank Group has announced its plan to mobilize up to EUR 40bn to ensure additional working capital support for SMEs (e.g. through bridging loans).
  8. The EU funds are also directed at supporting the research and healthcare sectors. At the end of January, the EC released a total of EUR 47.5 million from Horizon 2020, the EU research and innovation programme, for 17 selected research projects in vaccine development, treatment and diagnostics. Subsequently, it earmarked an additional EUR 140 million for vaccine development. SMEs and start-ups with innovations related to the fight against coronavirus could also apply for the EIC Accelerator programme by 18 March, which has a budget of EUR 164 million. Furthermore, the Innovative Medicine Initiative (IMI) has launched a call for research projects in treatment development. The EC will contribute up to EUR 45 million to the call and the pharmaceutical industry is expected to contribute a similar amount.
  9. On 26 March, the European Parliament approved a proposal for a regulation amending Council Regulation (EC) No 2012/2002 in order to provide the financial assistance to the Member States and countries with which accession to the Union seriously affected by a threat to public health. On the same day, specific measures were taken to mobilize investment in the Member States' healthcare systems and other sectors of their economies in response to the spread of COVID-19.
  10. On 28 April 2020, the EC adopted a package of measures in the field of banking to facilitate the provision of bank loans to households and businesses throughout the European Union. The aim is to maximize the ability of banks to lend and mitigate losses. To this end the timetable for the application of international accounting standards should be adjusted, public guarantees provided during the coronavirus crisis should be treated more favourably and others. The EC wants to speed up the implementation of certain measures that should motivate banks, for example, to finance employees or small and medium-sized enterprises and other projects. Another measure is to reduce the requirement for reserves that banks must keep for loans to companies at risk of insolvency.

Contractual Relationships

Last update: 1 June 2020

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If you fail to perform your contractual obligation (or if such a situation is imminent), you should notify your counterparty immediately. By doing that, you limit your obligation to pay compensation (damages) to the counterparty in the extent to which the respective damage/loss could have been prevented.
In some cases, the performance might become (physically or legally) impossible (e.g. providing a pre-arranged package of tourist services, short-term accommodation or hotel services in a fixed time while the emergency measures are in effect and restrict such activities). Such obligations cease to exist automatically, by operation of law. Even in this situation, we do recommend notifying the other party without undue delay, especially to limit your liability for damage/losses that could be prevented (e.g. void travel costs), trying to find a solution by a renegotiation of the contractual obligation and, if possible, or settle unjust enrichment, if any.
If you can provide performance only with delay or to a limited extent, it is also necessary to notify your counterparty. Unless your contract stipulates otherwise, the counterparty may give you an additional period to provide performance, if you are in default with such performance. If you fail to perform during that additional period, the counterparty is entitled to withdraw from the agreement.
According to the law, that came in force recently, if you can prove, that timely fulfilment of your monetary obligations became impossible or difficult due to the restrictions relating to the extraordinary epidemic measures, your debtor may demand only the penalties corresponding to the amount of the default interest as stipulated by the respective law during such extraordinary epidemic measures.
Considering how unprecedented the current situation is, it is advisable to communicate with the other party and try to seek a solution that brings balance between the values of performance provided mutually, alleviates possible disproportions or unjust adverse effects. Unless stipulated otherwise, the law establishes the right to renegotiate the contractual terms of the party that is negatively and disproportionally affected in its rights and obligations due to an unpredictable, substantial change in circumstances. If you manage to renegotiate your contract, please remember to enter into an amendment to reflect the agreed changes or to confirm a termination of the contract in writing. If you do not manage to renegotiate, you can apply to the court to settle the balance between contractual rights and obligations or to cancel the obligation. However, in these situations, the court is not bound by the parties' petition and the procedure may therefore present a certain risk.
Even your customers might be in default, e.g. when they do not accept the contractual performance from you or when they do not provide you with the cooperation necessary for the handover of performance. Should this be the case, the liability for the accidental loss or damage to the performance passes to the customer. Nevertheless, you still should adopt measures to limit any possible damage or loss. If the customer refuses to accept the performance and, when it is possible with regard to the kind of performance, you can place the performance into judicial custody at the customer’s cost.
Please bear in mind that not only during the state of emergency, statutory and contractual rights should be exercised only in line with good morals.

If you receive information from your supplier about the (imminent) delay in the delivery of products or services, or that it will not be able to make delivery at all, we recommend that you request detailed information about the situation and negotiate future steps with the supplier. In the course of negotiations, it is appropriate to notify the other party of the anticipated amount of damage/loss. At the same time, measures must be taken to minimize the imminent damage/loss (for example by securing supplies from an alternative supplier, where possible). Your supplier is not responsible for any damage/loss that could have been avoided.
If the supplier is able to provide performance only partially or at a later date, and unless stipulated otherwise, you may request the performance within an additional period. If the performance is still not provided within this period, you may withdraw from the contract.
If the supplier is not able to fulfil its obligations at all (for example, to supply respirators to a private entity while the emergency measures are in effect and prohibit such a sale), such obligation ceases to exist, by operation of law, due to so-called subsequent impossibility of performance.
Given the exceptional nature of the situation, we encourage you to exercise your rights carefully, as it cannot be ruled out that in some cases the strict exercise of certain statutory or contractual rights may be contrary to good morals. In particular, now it is appropriate to communicate with the other party and seek solutions that restore the balance of rights and duties of both parties, or at least alleviate any disproportion thereof. This is because in these exceptional situations, when there is a substantial change in circumstances, the law enables the disadvantaged party to claim the renegotiation of the contract with the other party. However, this right may be excluded in contracts.
Please remember that any agreement on new conditions should be reflected in an amendment or by a conclusion of a new contract.

Considering the current situation, it may happen that you are unable to fulfil your obligations arising from a contract and thus your counterparty might suffer damage/losses. How do you proceed in such a situation?
Let your counterparty know about such a situation immediately, preferably even before you breach your obligations. Then try to negotiate with the other party about the situation and the steps that could be taken so that a solution acceptable for both parties is found. If you succeed in finding such solution, have it confirmed in writing (execute an amendment, new agreement or at least minutes of the meeting).
Unless the contract excludes it, the law provides a way to liberate yourself from the obligation to provide damages in some cases. This applies to situations when an extraordinary, unpredictable and unsurmountable obstacle prevents you from fulfilling your obligations (the pandemic and the measures adopted for its suppression can be considered such an obstacle). However, the liberation is possible only if the obstacle arose after the contract had been made (i.e. not from the contracts made after the existence of such an obstacle is known) and only if the debtor was not already in default when the obstacle appeared.

The law came into force stipulating, that the insolvency petitions filed as of 24 April 2020 until 31 August 2020 shall be disregarded.
Abovementioned law also amended the Insolvency Act, enabling the possibility of an extraordinary moratorium. The affected businessman is now able to file an extraordinary moratorium petition to the court and obtain a protective period of up to three months during which the creditors will not be able to act.
The declared moratorium will silence the creditors and give the entrepreneur the opportunity to breathe and regroup his financial powers so that at the end of this period his establishment will remain healthy at least to the extent that the risk of bankruptcy is avoided, ideally permanently. During the moratorium, the debtor may determine in particular which creditors he considers to be crucial for the maintenance of his business and pay their claims preferentially (irrespective of whether others were due earlier). Other creditors whose contractual relationships with the debtor have lasted for at least a certain period are prohibited from terminating their contracts with the debtor or withdrawing from them due to the debtor's delay in repayment.
Details on this issue can be found on our blog

The company is now released from the obligation to file the insolvency petition in case of its bankruptcy. This applies as of 24 April 2020 and expires 6 months after the extraordinary epidemic measure has ended or been cancelled (but no later than on 31 December 2020) under condition, that the company was not bankrupt before the extraordinary epidemic measure was taken and that the bankruptcy has been mainly caused by extraordinary epidemic measure which prevented it from fulfilment of its monetary obligations or make such fulfilment significantly harder.

On 17 April 2020, the law came into force to declare a moratorium on the repayment of loans and mortgages, which is binding for all banks and non-banking institutions. It is important for entrepreneurs, as bank clients, to apply for a moratorium on repayment of bank loans (principal and interest) for three to six months due to the pandemic. The loan repayment period will then be extended by the period of the interruption of instalments.
Instalments will be deferred for both consumer and business loans, including mortgages that have been negotiated and utilized before 26 March 2020.
On the other hand, the moratorium does not apply to credit cards, overdrafts (Czech: “kontokorent”), revolving loans, operational leasing or loans related to capital market transactions.
Furthermore, instalments cannot be postponed on loans where the debtor has been in default for more than 30 days as at 26 March 2020.
If the client makes use of the postponement of the repayment, the loan repayment period will be adequately extended by the period for which it will be interrupted. Interruption of the loan repayment will not lead to a negative entry in the debtor registries.

The Parliament of the Czech Republic approved a bill under which the landlord cannot terminate your lease until 31 March 2020 for the sole reason that you are in delay with the payment of rent or services for the decisive period (see below), if the three following conditions are fulfilled. The first condition is that the purpose of the lease is to carry out business activities and the premises or room serves at least mainly for business purposes. Secondly, the delay occurred for the period between 12 March 2020 and 30 June 2020, the so-called 'decisive period'. Thirdly, the delay was largely due to the constraints of the extraordinary measures in the event of the epidemic, which made it impossible or significantly more difficult to conduct business activities. You must certify all three conditions to the landlord by submitting relevant documents within fifteen days of the first day of delay in paying the rent. All receivables that came due during the decisive period must then be settled by 31 December 2020, i.e. by the end of the so-called protection period. If you do not do so, your protection will end, and the landlord has the right to terminate the lease with a special notice period of only five days.
According to the prepared bill, the landlord will have the right to demand the termination of the lease if it cannot be fairly demanded of him to tolerate restrictions to said extent. However, this will only be possible after the emergency measures are terminated and not before the end of the official emergency.
Please note that the landlord's right to terminate the lease for other reasons or other rights of the landlord arising from the delay are not affected. If the lease ends before the expiry of the protection period (before 31 December 2020), you must pay the receivables due within 30 days of the end or termination of the lease.

Compensation for loss from the state

Last update: 1 June 2020

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Actions taken by the state in relation to the occurrence of coronavirus and the COVID-19 disease in the Czech Republic has had (and will continue to have) a negative impact on business. The question has therefore arisen as to whether and how these losses could be compensated.

The professional public agreed that the so-called Crisis Act offered a recourse. However, on 23 March 2020 the Czech Government took an unusual step: it abolished the original government resolution which imposed restrictions on retail sales and restrictions on freedom of movement. The same measures were immediately announced as extraordinary measures of the Czech Ministry of Health, and the Government simply acknowledged it. One of the reasons for this could be that extraordinary measures of the Ministry of Health are issued on the basis of the Public Health Protection Act and not the Crisis Act. While the Crisis Act offers a specific form of compensation, this is not the case with the Public Health Protection Act.

Whatever the motives of the Government, it was questioned for the entire duration of the extraordinary measures issued by the Ministry of Health whether the Ministry of Health had been empowered to interfere with fundamental rights and freedoms so profoundly. This conclusion was confirmed on 23 April 2020 by the Municipal Court in Prague, which annulled the extraordinary measures of the Ministry of Health on 27 April 2020. New measures are currently being issued again by the Government on the basis of the Crisis Act.

In view of the above-mentioned information, the restrictions can be simply divided into "governmental", which were issued on the basis of the Crisis Act in the period until 23 March 2020 (i.e. until the transfer of the competence to the Ministry of Health) and then from 24 April 2020 (i.e. after the annulment of extraordinary measures of the Ministry of Health by the court), and "ministerial", which were issued in the meantime.

In relation to the governmental measures, there is a potential claim for the compensation for loss from the state under the Crisis Act. Please note that these claims have a specific regime and must be claimed within 6 months from the moment of discovering the loss.

In relation to the ministerial measures and their annulment, the possibility arose to claim compensation from the state under the Act on Liability for Damage Caused During the Exercise of State Power by a Decision or Incorrect Official Procedure, provided that the Ministry of Health does not successfully challenge the annulling judgment in a cassation appeal before the Supreme Administrative Court of the Czech Republic.

The application of the compensation for loss from the state, whether under the Crisis Act or the Act on Liability of State for Damage, has never faced such widespread impacts. It is therefore not possible to predict the approach of the competent authorities or Czech courts to settle claims in this case and in this situation. However, we recommend carefully recording and storing all impacts of the existing measures, as well as taking preventative steps to minimize losses.

Boards of Directors, Executive Directors and General Meetings during the pandemic

Last update: 1 June 2020

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If the conditions for preparing the financial statements for 2019 were more difficult due to the current pandemic and related measures, e.g. because of insufficient working capacity, it does not relieve the entity either of its responsibility under the Accounting Act, nor its statutory body of ensuring proper accounting.

Although the Accounting Act does not expressly contain a deadline for the preparation of the financial statements (and therefore does not contain any sanctions), the preparation is necessary for (i) filing a tax return, (ii) discussing the financial statements in the general meeting within the time limit set by the Business Corporations Act, i.e. no later than six months after the last day of the previous financial year – for more details on the change of this obligation in connection with Act No. 191/2020 Coll., on certain measures to mitigate the effects of the coronavirus epidemic (“Lex Covid”) see here, and (iii) proper publication of the financial statements. However, as a result of non-compliance with these obligations, sanctions may be imposed or the duty of due care may be violated. Therefore, despite the current situation, we recommend making every effort to ensure that the financial statements are prepared in a timely manner (e.g. using external consultants) to avoid any negative consequences.

As a result of unexpected events, the auditor may need to modify its audit plan and the timing or extent thereof. However, if the delay of the auditor results in the Company being unable to meet its obligations in a timely manner, the statutory body should consider the possibility of changing the auditor and trying to find a suitable alternative. Once the statutory body has provided a suitable alternative, it is obliged to submit it to the general meeting, within whose competence the appointment of the auditor falls.

It cannot be ruled out that, as a result of the current situation, it may be difficult for some companies to submit and discuss the financial statements within the prescribed period of six months from the end of the previous financial year. A certain solution to this issue is provided by Lex Covid, which was as the Act No. 191/2020 Coll. published in the Collection of Laws on 24 April 2020.

For the duration of the state emergency measures, Lex Covid releases companies (or their statutory bodies) from the obligation to discuss the financial statements in a timely manner imposed on them by the Act on Corporations and postpones the obligation to discuss it to a "post-coronavirus" period. Those companies, for which the statutory deadline for discussing the regular financial statements should expire earlier than three months after the end of the state emergency measure in the epidemic, may therefore discuss the regular financial statements within three months after the end of such a measure, but no later than 31 December 2020. It is necessary to emphasize that the above regime applies only to such state emergency measures that would make it impossible or significantly difficult to discuss the financial statements.

Irrespective of Lex Covid, however, late discussion itself has no impact on the company as such, nevertheless, it may be qualified as a breach of due care . The discussion and approval of the financial statements is the prerequisite for the publication of financial statements which must be made by the end of the following financial year at the latest. Companies may face certain penalties for late publication.

Although Lex Covid offers a possibility for postponing the statutory obligations when discussing financial statements, we recommend considering the alternative methods of decision-making by the general meeting that are mentioned here. This is in particular due to the limited applicability of the exemption to the state emergency measures which make it impossible or significantly more difficult, and the assessment of this situation will differ from company to company.

In view of the existing measures and security risks, holding classic general meetings is basically impossible. However, there are other “non-contact” methods for taking decisions within the competence of general meetings that can be used by both limited liability companies and joint stock companies. These alternatives not only do not require personal participation, but also have other advantages such as a faster approval process or the increased comfort of partners and shareholders.

One alternative is to make decisions outside the general meeting by means of a “per rollam” (circular resolution). This method of decision-making is usually implemented in writing, but technological means can also be used (see below). Basically, it involves sending a draft of the decision to all partners/shareholders, who shall comment on it within a certain period of time without calling a general meeting. Admissibility or possible restrictions (e.g. for a certain type of decisions) depend on the type of company and its articles of association. In limited liability companies, this way of decision-making is allowed by law.

It is also possible to hold a general meeting using technological means such as videoconferencing, internet, email or correspondence voting. These technological means can also be used for decision making by per rollam. In this case, however, the possibility of using technical means must be explicitly stated in corporate documents for both types of companies (limited liability companies as well as joint-stock companies).

However, in accordance with the newly effective law (Lex Covid), per rollam or general meeting using technological means is possible for all companies for the duration of the state emergency measures, without exception, when the state emergency measures last during the epidemic. Here we present a closer look at this topic.

The decision-making of an elected collective body of a company (i.e. the Board of Directors, the Supervisory Board, the Administrative Board or, exceptionally, the Board of Executive Directors) is usually made by meeting. However, due to current limitations and security risks, a joint meeting in the classic sense is in principle impossible. However, it is possible to make decisions in other ways, either by so-called “per rollam” (circular resolution) or by using technological means similar to general meetings.

It should be noted, however, that the elected bodies are thus "alternatively" entitled to make decisions only if this is expressly permitted by the memorandum or articles of association. The introduction of these methods would therefore require a change in the relevant founding document. In accordance with the newly effective law (Lex Covid), however, for the duration of the state emergency measures, per rollam or general meeting using technological means is possible for all companies without exception (see here).

The statutory body or its members (for simplicity’s sake “statutory body”) are obliged to act with due care at all times and under all circumstances. The coronavirus crisis does not change this, on the contrary, due to the exceptional nature of the situation, the statutory body must act in many respects more cautiously.

First of all, it is advisable to take all necessary measures to ensure that the current crisis has a minimal negative impact on society. If the statutory body is not sure of the correctness of its action, it should choose a suitable advisor in the relevant area in due time. In view of the impending approval of the final statements and decisions on the allocation of its economic results, the statutory body should also consider the possible negative consequences of the coronavirus crisis in the long term. When considering the payment of dividends on profit or other part of the equity, the statutory body is obliged under all circumstances (not only now) to ascertain whether this will not cause the company to become insolvent.

As a last resort, the company may be in a situation where its further existence is in jeopardy (e.g. due to imminent bankruptcy) – please see here. The statutory body is then obliged to convene a general meeting and inform the shareholders about these circumstances and discuss with them what measures the company will take. In connection with the impending bankruptcy, the statutory body is also obliged to do everything within reason necessary to avert it.

The coronavirus crisis may also prevent the statutory body from resigning. If the statutory body resigns at an inappropriate time, it is liable for any damage caused to the company. Therefore, in the event of termination, the statutory body should do its utmost to ensure the smooth transfer of its function to its successor.

In the case of key decisions, the statutory body should carefully consider whether it is a matter relating to the organization and management of the company's normal business, i.e. pertaining to business management, or whether it is of a strategic nature. In view of the coronavirus crisis, it is likely that some of the decisions of the statutory bodies will fall within the second area.

Responsibility for business management always rests solely with the statutory body, which in principle is not entitled to transfer responsibility (e.g. by requesting instruction from the General Meeting) nor can it be effectively limited. Some “comfort” can be achieved, for example, by using expert opinions, setting up rules of procedure, appropriately allocating the responsibilities of individual members with sufficient control mechanisms, or insuring the liability of members of the bodies for the performance of their duties (D&O).

Strategic issues may, however, fall within the competence of the general meetings in certain circumstances. Therefore, part of the responsibility can be delegated to the supreme body. In such a case, the statutory body has the option to submit a proposal for approval to the General Meeting or request appropriate instructions from the General Meeting. However, the possibility of strategic decision-making by the supreme body depends on the type of company and the rules stated in its founding documentation.

In addition to the usual annual general meeting held, among other things, for the purpose of discussing and approving the regular financial statements (for more details see here), the statutory body of capital companies (i.e. limited liability companies as well as joint-stock companies) must also convene the general meeting in other cases required by legal regulations/the rules stated in its founding documentation.

In connection with the possible negative effects of the coronavirus crisis, we would like to draw attention to the duty to convene a general meeting at a time when a company is “in trouble” from the perspective of the Business Corporations Act, for example if there is a risk of bankruptcy, a certain level of loss has been reached (for joint-stock companies) or for other serious reasons. However, it is up to the statutory body to evaluate the seriousness of the situation and to proceed accordingly.

We would like to add that the COVID-19 disease and related measures do not relieve the statutory body of the obligation to convene a general meeting in cases required by law/the rules stated in the company’s founding documentation. Given the current restrictions that prevent the holding of general meetings, alternative methods can be used. You can read about the alternative methods, including Lex Covid, which shifts the obligation to discuss the financial statements here.

Taxes and Insurance

Income Tax

Reviewed as of 9 June 2020, 8:00

With regard to CIT and PIT, the following measures apply without the necessity to provide any evidence about a connection to the outbreak for taxpayers (i) not subject to a statutory audit and/or (ii) not engaging a tax advisor for income tax return preparation and filing:

  • A general waiver of the penalty for failure to submit a tax return from 1 April 2020 to 18 August 2020.
  • A general waiver of late payment interest from 1 April 2020 to 18 August 2020.

It is also expected that a similar approach will also be taken in the field of health and social insurance where reports are usually filed by individuals by the end of April 2020. However, no official communication was made available as of today.

The same approach is taken to the Taxpayers (i) subject to a statutory audit and/or (ii) engaging a tax advisor for income tax return preparation and filing, (iii) who are not under the purview of the Specialized Tax Office (Specializovaný finanční úřad).

Such taxpayers are obliged to file their tax returns and settle their taxes by the standard due date (1 July 2020) .These taxpayers may apply for an extension of the due date by written request.

The obligation to pay advance payments for PIT and CIT due by 15 June 2020 is waived (i.e. advanced payments do not have to be paid and the tax authorities will not assess sanctions). This concerns the second advance payment for quarterly payers and first advance payment for semi-annual payers.

It will be possible to apply a tax loss created in a taxable period ending on 30 June 2020, or later in 2020(for a tax return submitted in 2020/2021) retrospectively in the tax returns for the two preceding taxable periods (“loss carryback”). This concerns both legal and natural persons. This measure requires an amendment to the Income Tax Act.

Tax loss carryback
The Czech Chamber of Deputies approved a crisis-relief tax package which, within the framework of personal and corporate income tax, introduces the possibility of applying a loss carryback for the period ending 30 June 2020. The taxpayer will now be able to deduct from the tax base a tax loss or a part thereof for even two periods immediately preceding the period for which the tax loss is assessed, in the aggregate amount of CZK 30 million. To apply for the tax loss carryback, the taxpayer will have to file an additional tax return for the relevant previous periods. This mechanism will mean that the tax paid in the past, after the application of the tax loss carryback, will lead to an overpayment of income tax which the taxpayer will be able to claim.
At the same time, the proposed amendment to the law introduces a special rule for the period ending 30 June 2020 or later, thanks to which the taxpayer will be able to claim back the tax loss he expects in this particular period before the deadline of filing, based on the taxpayer’s own estimate. However, this expected tax loss can only be claimed in one immediately preceding period. However, if the subsequently reported tax loss is lower than the estimate, the taxpayer will be obliged to file an additional tax return for the period in which he claimed a higher tax loss and to pay interest on arrears on any additional tax surcharge.

 

Direct support to freelancers (“compensation bonus”)

Reviewed as of 9 June 2020, 8:00

Direct support to freelancers is provided in the form of a so-called compensation bonus.

The compensation bonus is available not only for freelancers who have a business based on the Trade Licence Act, but also for other freelancers such as doctors, advisors, actors, etc. The bonus is available to freelancers whose freelance business is their main economic activity as well as to those who run their business along with other activities or have other sources of income (e.g. pensioners, parents receiving parental support).

Those entitled to receive the bonus should be freelancers whose business operation has been made impossible or has been negatively affected due to governmental regulations e.g. those whose business premises have been closed, whose employees have been ordered to go into quarantine or where demand for their products or services significantly decreased (translators, guides, etc.).

The entitled persons are freelancers with an active business as at 12 March 2020 as well as those who interrupted their business activities any time after 31 August 2019 (for example those who have only seasonal business activities).

A freelancer receiving unemployment support is not entitled to the compensation bonus and, conversely, if a freelancer receives the compensation bonus, he is not entitled to unemployment support.

The compensation bonus is included in the total amount of income for evaluation of entitlement for other material support and state social benefits.

The amount of the bonus is CZK 500 per day for the period from 12 March 2020 to 30 April 2020, which is a maximum of CZK 25,000. The bonus is free of tax and social security charges.

On 22 April 2020, the deputies approved the extension of the period in which the bonus may be obtained from 1 May 2020 until 8 June 2020. The period reflects the latest date by which closed businesses will be expected to reopen as per the current governmental plan. The maximum amount of the additional bonus is CZK 19 500. The conditions for receiving the compensation remain the same, though freelancers with labour contracts for pedagogical activities may now also obtain the bonus.

The bonus is administered by the Financial Offices as an income tax refund.

The bonus is paid out based on a written application containing a personal declaration that the conditions mentioned above are fulfilled and the bank account number to which the bonus will be paid. The application may also be sent via email with the applicant’s own signature. The application for the first bonus period (until 30 April 2020) has to be submitted by 29 June 2020, and the application for the second bonus period (until 8 June 2020) has to submitted by 7 August 2020. After these dates, the entitlement to the compensation bonus expires.

 

Insurance

Reviewed as of 11 June 2020, 8:00

Freelancers

The President signed a law waiving payment of social security advances for freelancers (“OSVC”) for the period from March to August 2020. Any advances paid in this period will first be used to cover liabilities already due, and then will be used as future advance payments for 2020.

It was also approved that total social security insurance for 2020 will be reduced for each month of the aforementioned period in which the freelancer performed their business activity for at least part of a month. The annual insurance will be reduced by CZK 2,544 per month for freelancers whose freelance business is their main economic activity and by CZK 1,018 for those who run their business along with other activities.

An extension of the deadline for filing the annual 2019 social security report has not been discussed within the current proposal.

The deadline for filing the annual 2019 health insurance report by freelancers has been extended until 3 August 2020.

Minimum health insurance advances (CZK 2,352 monthly) for the period from March to August 2020 are waived. Freelancers making higher than minimal advances will only pay the difference for this period. The health insurance that would normally be paid in this period in the form of advance payments may be paid later within the deadline for the settlement of 2020 health insurance liability. Any penalties for late payments during the aforementioned period will be waived.

As of 1 April 2020, the Czech government has launched the program for payments of family member care benefit to freelancers. This benefit amounts to CZK 424 per day. The entitled freelancers are those, who are parents with children up to 13 years of age and this benefit will be paid throughout the whole period while schools are closed. In order to apply, freelancers will have to deliver a proof that this benefit is not already paid to the other parent within his or her employment. The application may be submitted via local Trade Licensing Office (“Zivnostensky urad”) or via the website of the Ministry of Industry and Business where electronic applications are available.

Employers and employees

80% reduction of the penalty for late payment of social security and unemployment insurance (the employer’s contribution) for the months May – July 2020 was approved if the insurance for those months is paid by 20 October 2020. The conditions for the reduction of the penalty are that the employer must pay the insurance which is mandatory for their employees on time and in the amount reported in the monthly summary.

The “ošetřovné” (benefit for time off work to care for a dependent – “family member care benefit”) for employees will be paid throughout the whole period while schools are closed rather than only for nine days. It was approved that this benefit will be paid to parents with children up to 13 years of age and parents may take turns using this benefit.

The benefit should also be available for parents whose children might not attend schools even if the schools were partly open.

With regard to late payment of health insurance contributions made by the employer for his/her employees for the period from March to August 2020, penalties will not be imposed by Health Insurance Companies if the contributions are paid by 21 September 2020. Late payment penalties will start accruing from 22 September 2020.

In terms of social security and payroll tax payments made by employers for employees, it is possible to apply for payment deferrals under existing regulations.

There is also no fine for late submitting of a statement of personal income tax collected by taxpayers as a deduction in the form of advances, if it was submitted until 31 May 2020 at the latest.

 

Value Added Tax

Reviewed as of 11 June 2020, 8:00

The Ministry of Finance has not extended the deadline for the submission of VAT reports or payment of VAT liability as such. In terms of VAT, the following measures apply:

  • A general waiver of the CZK 1,000 penalty for failure to submit a control statement, only if the liability to settle such a penalty arises in the period from 1 March 2020 to 31 July 2020.
  • If the VAT payer is able to prove the failure is in any way related to the COVID-19 outbreak (typically an illness or quarantine of accountants or other key employees whose absence made it impossible to fulfil VAT obligations; a substantial drop in revenues due to the outbreak), the following measures apply:
    • A waiver of the late payment interest.
    • A waiver of the interest connected to the deferral of VAT payment or VAT payment instalment schedule.
    • An automatic waiver of the sanction for the late submission of the VAT return if the tax office grants one of the two above waivers as well.
    • A waiver of other sanctions for the late submission of the control statement (all sanctions from CZK 10,000 to CZK 50,000). This applies to cases when the appeal is issued within the period of 1 March 2020 to 31 July 2020.
    • A general waiver of administrative fees for the filing of the respective requests.

All sanctions can be waived only after the related VAT liability is paid and the respective control statement(s) are submitted.


There is a waiver of VAT payment for the free-of-charge delivery of selected medical supplies to mitigate the effects of the coronavirus outbreak. These include, for example, respirators, masks, gloves, face shields, or disinfectants and raw materials for their manufacture. The exact definition of the goods is given in the Financial Bulletin 6/2020. The waiver shall apply to the free-of charge supplies of protective equipment having the tax point in the period from 12 March to 31 July 2020.

The tax authorities also waived VAT payment for the free-of-charge delivery of goods or provision of services provided to health service providers, the integrated rescue system, the Army of the Czech Republic and social service providers, including employees and volunteers of these institutions. Details are available in Financial Bulletin 7/2020. The waiver coveres the free-of-charge deliveries and provision of services performed within the state of emergency, i.e. in the period from 12 March until 17 May 2020.

Please note that the described mechanism does not apply to goods that were purchased solely for the purpose of being subsequently donated. In this case, the cost incurred by the donor for the donation is increased by VAT, which cannot be claimed on input.


On 3 April 2020, the European Commission issued a decision allowing Member States to exempt medical supplies and equipment related to COVID-19 from import duties and VAT.

In this context, the customs authorities have published the conditions under which the exemption will be recognized.

In order to be exempt from customs duties, medical supplies must be imported by a government or other charitable or philanthropic organization with the purpose of distributing them free of charge to persons in need. Furthermore, the acquisition of goods free of charge from a third-party country is also subject to a VAT exemption. Should the goods be paid for, however, the import VAT exemption cannot be granted, irrespective of the status of the importing entity.

The Chamber of Deputies will further discuss the anti-crisis tax package, which among other things envisages a reduction in the VAT rate from 15% to 10% in the case of accommodation services, admission to cultural, sporting or entertainment events, sports grounds (including ski lift tickets) and saunas or similar facilities. The draft will be discussed in an abbreviated procedure and the changes will take effect on the day after its publication in the Collection of Laws.

Interested in global VAT changes? Visit our Global VAT Online.

 

Other taxes

Reviewed as of 11 June 2020, 8:00

Real estate tax
Czech government also wants to expand the possibility for municipalities to apply real estate tax exemption. Currently, municipalities can fully or partially apply real estate tax exemption in their territory by a generally binding decree on real estate affected by a natural disaster (e.g. flood, storm, extreme drought). Newly, they will be able to take this step in the event of other emergencies, such as pandemics, crisis measures under the Crisis Act or industrial accidents. This exemption will be possible to apply retroactively.

Real estate acquisition tax
Law-makers are also discussing a special bill abolishing the real estate acquisition tax. According to the current wording of the draft bill, the tax should be abolished retroactively from December 2019. However, at the same time the possibility of applying a mortgage interest deduction in relation to personal income tax should be abolished with effect from 2022.

There is a remission of the fine for late filing of a real estate acquisition tax return, for late payment of a real estate acquisition tax or an advance on this tax. Without the risk of a penalty, these returns can be filed by 31 December 2020.

In such cases, late payment interest or interest connected to the deferral of tax payment upon real estate acquisition shall also be waived.

Road tax
Within the anti-crisis package the government also suggests reduction of road tax by 25% for trucks with a maximum permissible weight of more than 3.5 tons. It will be possible to apply this reduction retrospectively from the beginning of 2020, which will also affect the advance payment for road tax paid this year.

A waiver is also granted for late payment interest on, or other interest connected to, the deferral of payment of road tax advances due on 15 April 2020 and 15 July 2020, if the payment is made by 15 October 2020 at the latest.

Excise duty
As part of the support for agricultural business, the deadline for refunding the overpayment of excise duty on so-called green diesel is being shortened. Now the overpayment is returned to the entrepreneur within 60 days from the assessment or additional assessment entitlement to its return. This period will be reduced to 40 days from the last day of the period for filing a tax return. If the tax administrator initiates a procedure to remove doubts or a tax audit, then this period will be 15 days from the notification of the payment order or additional payment order.

 

Electronic Sales Records

Reviewed as of 29 May 2020, 8:00

Suspension of the obligation to electronically record sales for entities in all stages of the EET (Elektronická evidence tržeb – Electronic Sales Records) until the end of the year 2020.

 

Other generally applicable rules of the Tax Code

Reviewed as of 11 June 2020, 8:00

There is a possibility to ask the tax authorities to postpone the payment of a tax or payment of a tax in instalments, but the taxpayer will need to provide reasons for the request. Alternatively, a request can be made for the remission of late payment interest in the case of a late tax payment. The related interests will be waived if they arose between 12 March and 31 December 2020.

All taxable persons are also exempted from the administrative fee for official applications to the tax or customs office if the application is submitted by 31 December 2020, e.g. the administrative fee for filing an application for waiver of the sanction for late filing of the control statement.

 

Our experts on law and taxes

David Borkovec

Market leader for Czech Republic, PwC Czech Republic

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Martin Diviš

Partner, Tax and Legal Services, PwC Czech Republic

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Tomáš Hunal

Partner, Tax and Legal Services, PwC Czech Republic

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Radek Buršík

Partner, PwC Legal

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Petr Kincl

Partner, PwC Legal

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