Please note that this section and the answers to the questions therein have been prepared as general recommendations without taking into account the specific situation and the particular subject. It is by no means a formal, legal or fiscal position on the individual issues addressed by the individual questions and answers. In this respect, the information in this section should not be considered as a recommendation to take or not to take any specific factual or legal action.
1. The company wants to contribute 200 CZK to the purchase of face masks. What are our options?
Response March 19, 2020: We recommend the purchase of masks by companies. These are currently considered as protective equipment and are therefore an operating expense when issued for use by employees. Should the company contribute to the direct purchase by employees, then this financial contribution is subject to taxation by the employee.
2. What financial support or relief can a Czech company (a foreign-owned subsidiary) expect from the Czech state due to a coronavirus epidemic?
Response March 20, 2020: At present, it is possible to claim reimbursement of the remuneration of employees who have been quarantined. A contribution of 80% to the salaries of employees may also be requested in the event that the company has been ordered to close down operations. The government is also preparing measures to mitigate the effects of the current pandemic; for current information, see our article Financial Support for Coronavirus COVID-19. From the tax relief point of view, it is possible to highlight the possibility of filing a tax return for personal and corporate income tax until 1 July 2020 without penalty (interest on late payment and fines for late filing of the return). At the same time, the penalties for late payment of the tax (interest on late payment and interest on late filing) will be waived if the delay is due to a viral infection. Also, for those who have been partially excused by the tax administrator or allowed to be delayed for reasons related to a viral infection, the penalty for late filing of tax returns will be automatically excused. Newly, waivers and delays will not be subject to an administrative fee. Finally, the state will also automatically waive the VAT payers for a late submission of a control statement (CZK 1,000).
3. What about the personnel costs of employees for the time of closing down a company with trade unions? What are the options, who pays what, what are the relief possibilities?
Response March 19, 2020: If the establishment is closed due to reduced sales of products or demand for the employer's services, it is usually the case that the employer cannot allocate work to the employee within the weekly working hours. Then it is the so-called partial unemployment, which is regulated by § 209 of the Labor Code. If a trade union operates with an employer, then an agreement must be concluded between the employer and the trade union on the amount of wage compensation provided for in Section 209 (2) of the Labor Code and the wage compensation must be at least 60% of the average earnings. Social and health insurance premiums are paid from wage compensation. We are still waiting for the legislative development of the situation.
4. What to do in the case of contractors who indicate a certain rate of profit in their transfer pricing documentation? What to do if they have losses in 2020? Who will pay for it?
Response 19 March 2020: A pandemic is a situation that has hit across the board not only manufacturing companies in Europe, but defacto all over the world. It is a crisis situation bringing risks that are not subject to management and decision-making mechanisms of production managers. Exactly opposite governmental restrictive measures play a very important role here.
If it is not possible for workers to reach their workplaces as a result of the closure of borders, restrictions on transport links or other preventive measures aimed at reducing the risk of contagion, then there is nothing else but to stop production. Such decisions cannot be attributed to the international group by a unilateral demand for loss compensation in favor of the tax jurisdiction in which the contractual production is carried out.
Therefore, we recommend that the controlling department closely monitors the uncovered production costs incurred in these difficult months. For the purpose of defending the losses of 2020, it will certainly be necessary to have documented the circumstances in which production companies decided to reduce production and what extra costs were associated with this decision.
5. In order to support entrepreneurs affected by Resolution of the Government of the Czech Republic No. 211 of 14 March 2020, the municipality wants to donate the amount of money to local entrepreneurs who must apply through the form posted on the municipality's website. In the case of donating an amount of up to 20 ths. CZK do we have to conclude a written contract? Can the City Council approve this donation?
Response 22 March 2020: The description of the process by which the municipality wants to implement its assistance to affected entrepreneurs meets the definition of donation and in accordance with the provisions of Act No. 128/2000 Coll. on municipalities and in the amount of up to CZK 20,000 the decision to provide a gift is in the competence of the City Council.
In connection with the current practice of interpretation, the Supreme Court of the Czech Republic in the judgment file no. 33 Cdo 5837/2017, dated 12 December 2018, concluded that if the donation was a cash sum donated in such a way that the recipient agreed to transfer it to the bank account, such a deed can be considered a handover and takeover of the item (pursuant to Section 628 (2) of the Civil Code - and even pursuant to Section 2057 (2) of the Civil Code) even without physical hand-to-hand delivery. We recommend adding to the resolution adopted by the City Council that applications of the “xy” are approved and that the implementation of the financial assistance will be a wire transfer to the bank accounts specified in the approved applications.
6. How do we properly project the compensation for "kurzarbeit" into accounting?
Response 15 April 2020: According to Czech accounting standards, this is an operating grant.
7. One of our employees has been ordered a quarantine after returning from Italy, however the beginning and the end the quarantine were before the declaration of emergency (12 March 2020). Can we claim a state contribution from the Antivirus program or not?
Response from 16 April 2020: The Antivirus programme is designed so that the period of eligibility of costs is set from 12 March 2020 to 30 April 2020. According to current development the Ministry of Labor and Social Affairs expects an extension until May. Therefore, the Antivirus Program may be used to pay a contribution to reimburse employers' eligible costs incurred only after and including 12 March 2020 (i.e. the day of announcement of an emergency).