Situation at 29 June 2020, 16:00 (will be continuously updated)
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Social security health insurance contributions
Social security contributions
1. Postponement of social security and health insurance payments
- The government approved a draft law to reduce the penalty on social security contributions paid by employers, namely premiums for the calendar months from May to July 2020.
- By default, the penalty is 0.05% for each calendar day of delay, making simplification 18.25% per annum. Based on the proposed adjustment, this penalty payment will be reduced to 20% (i.e. 3.65% per annum.) if premiums are paid by 20 October 2020.
- The employer will continue to be obliged to submit reports and pay insurance premiums for employees in due time, i.e. by the 20th day of the following calendar month.
- At the same time, the bill introduces the obligation to submit reports exclusively in electronic form for all employers, and non-cash premium payments.
- The draft law must be approved by parliament and signed by the president.
2. Waiver of social security contributions for companies with up to 50 employees (Antivirus scheme C)
On 25 May, the government approved the proposal of the Ministry of Labour and Social Affairs (MPSV) to waive payments of social security contributions for companies with up to 50 employees for June, July and August 2020.
Only a portion of the social security payment paid by employers will be waived (24.8% of the employees' total income), and the maximum part of the waived payment will be 1.5 times the average wage (ie the amount of CZK 52,253). In other words, the insurance assessed from the part of the assessment base exceeding the amount of CZK 52,253 is further paid. Also, premiums paid by the employee (6.5% of the employee's assessment base) are still paid. Employers should not submit an application, but in the monthly statement notify the District Social Security Administration of a reduction from the assessment base and pay a reduced social security payment.
Employers who meet the following conditions in a given month will be entitled to a waiver of social security payments:
- They have up to 50 employees who are covered by health insurance;
- The number of employees on the last day of the month is at least 90% of the staff as at 31 March 2020;
- The sum of the assessment bases, i.e. the volume of wages, for the payment of insurance for a specific month is at least 90% of the total assessment bases for March 2020;
- The employer pays insurance for the employees on time;
- The employer cannot draw on the Antivirus scheme B in the same month (obstacles on the employers' side)
This reduction can only be applied to the report for the relevant calendar month and not retroactively! An employer who submits a report without applying a reduction may not subsequently apply the reduction by submitting a new report.
The reduction of the employer's assessment base and the postponement of the payment of insurance premiums can be used at the same time.
Health insurance premium
- Based on the amendment to the Act on Public Health Insurance, no penalties will be calculated for delays in the payment for health insurance for the period from March 2020 to the end of August 2020 if the premium is paid by 21 September 2020. The standard penalty is 0.05% of the amount due for each calendar day of delay. This standard penalty will be incurred at the earliest from 22.9.2020.
Drawing benefits from the sickness insurance system - nursing allowance
Providing care for children under 13 years of age
The conditions for receiving the nursing allowance changed as follows:
- The nursing allowance will apply to children under 13 years of age.
- It will be provided until 30 June 2020, i.e. the time schools have been closed, and if necessary, even after schools have reopened but the child does not attend for the listed reasons. Until 30 June 2020, all parents who for objective reasons cannot place their child in school or kindergarten will continue to be entitled to the nursing allowance. The reasons include, for example, children who for health reasons are at greater risk of contracting the disease, children with allergies, children who live in the same household as someone in a high-risk group, or insufficient capacity and reduced opening hours in school groups.
- The nursing allowance can be claimed retroactively.
- Alternation in the drawing of the allowance is possible several times; of course, the nursing allowance pertains to only one of the authorised persons at a time; alternation is not possible during a single calendar day.
- Information on rotation must always be provided after the end of the month, by filling in the so-called “Care Statement” indicating the individual days the person took care for the child. The employer than completes the second part of the Statement, where he states the days when the person worked (received wage). After completion, the employer sends a Statement to self-employed person, which pays the benefit.
- From day one, the employee is entitled to 60% of the daily assessment base (reduced). This benefit is paid by the State (District Social Security Administration).
- From 1 April, nursing allowance increased to 80% of the daily assessment base (reduced). Entitlement to nursing allowance also arises in the case of non-employment agreements concluded before 11 March 2020 (mostly only employment agreements), and from which health insurance is paid.
- The government is proposing to increase nursing allowance to 80% of the daily assessment base (reduced) from 1 April 2020.
- In terms of the employer's costs, this is an advantageous alternative.
- The application procedure, necessary documents, forms and other information can be found at: https://www.cssz.cz/web/cz/osetrovne
Receiving support from the Antivirus programme (schemes A and B)
The aid covers cases where COVID-19 creates barriers to work that restrict the employer's activities:
Scheme A: Forced traffic restriction and quarantine
1. Employee was ordered into quarantine
- The procedure is the same as for normal incapacity for work due to illness. This means that the employee is entitled to wage compensation of 60% of his or her average earnings (calculated from the reduced assessment base under the Labour Code) for the first 14 days of quarantine. From the 15th day, the employee will receive sickness benefit from the sickness insurance system.
- Under the “Antivirus” scheme, the state provides employers with a wage compensation allowance for the first 14 days, amounting to 80% of the wage compensation paid. As of the 15th day, the state pays the sickness benefit as standard. This is the so-called "Antivirus" Programme Scheme A by the Ministry of Labour and Social Affairs (MPSV).
- A detailed guide to the use of this support is available at: https://www.mpsv.cz/antivirus
2. The employee has not been given a quarantine order, but the employer decides that the employee will not stay in the workplace
- In this case, no benefit can be drawn from the insurance system.
- The following options are available:
- Agreement on working from home - an option subject to the consent of the employee, if the nature of the work permits.
- Send employees home due to "obstacles" to work – an option even without the employee's consent; the employer has to pay wage compensation equal to average earnings.
- Compensatory time off - if the employee has worked overtime, the employer may order him or her to use the overtime.
- Unpaid leave - at the request of the employee, the employer may allow him or her to take unpaid leave.
- Holiday - the possibility of taking holiday, even without the employee's consent; however, this leave must be ordered 14 days in advance, unless a shorter period has been agreed.
- Cancellation of planned shifts - the possibility to modify the shift schedule, even without the employee's consent; however, the shift schedule must be set 14 days in advance, unless a shorter deadline has been agreed.
3. The employee refuses to come to work
- The Labour Code gives the employee the right to refuse to perform dangerous work. However, the rejected work must directly and seriously endanger the employee's life or health, or the life or health of other people. The rejection test is thus very strict and will not be fulfilled by the average employee at this point in case of concern about coronavirus infection.
- In such cases we generally recommend hearing the employee's concerns and trying to find a solution that will meet their needs. This may include the possibility of working from home, taking leave or providing unpaid leave. Should an employee still refuse to come to work, this is an unexcused absence for which the employee may be penalised.
- Of course, there may be more complicated cases that need to be assessed individually (persons with compromised immune system, respiratory problems, heart disease, diabetes, pregnancy, etc.).
4. Closure of the establishment due to anti-pandemic measures
- This situation is regarded in the same way as quarantine. The employer therefore pays the wage compensation to the employees for the first 14 days. The state pays the sickness insurance benefit only from the 15th day.
Under the “Antivirus” scheme, the state provides employers with a wage compensation allowance for the first 14 days, amounting to 80% of the wage compensation paid. As of the 15th day, the state pays the sickness benefit as standard.
5. Establishments closed by government decision during the state of emergency (shops, restaurants and other premises that had to be closed)
In this case, no sickness insurance benefit can be drawn.
In this specific case it is an obstacle to work on the side of the employer according to Section 208 of the Labour Code due to the impossibility to allocate work in connection with the issuance of government resolutions and emergency measures of the Ministry of Health to protect public health.
Under the “Antivirus” scheme, the state provides employers with a wage compensation allowance if an employee was provided with 100% wage compensation, of 80% of the paid wage compensation, including contributions. However, the maximum of the compensation amounts to CZK 39,000. This maximum amount is derived from the average super-gross wage, including mandatory contributions, i.e. from CZK 48,400.
Scheme B: Related economic difficulties
1. Closure of an establishment for other reasons or reduced operations (partial unemployment - an obstacle on the side of the employer)
- In this case, no sickness insurance benefit can be drawn.
- The employer may first consider using an option to reduce the financial impact, such as ordering leave, taking of compensatory time off or rescheduling shifts.
- However, the employer must then provide the employee with 100% wage compensation, except in the following cases:
- 80% in the event of a shortage of supply of raw materials, power or similar operational cause;
- In this case, an internal regulation referring to Section 207 (a) of the Labour Code should be issued due to limitation of the availability of inputs (raw materials, products, services) necessary for the employer's activity as a result of quarantine measures (or generally production failures caused by COVID-19 infection at the supplier, including abroad);
- 60% due to reduced sales of products or demand for the employer's services;
- In this case an internal regulation according to Section 209 of the Labour Code should be adopted, or if there is a trade union within the firm, the employer must conclude an agreement with it.
Under the "Antivirus" scheme, the state will provide a contribution to the employer of 60% of the paid wage compensation, including contributions. This contribution will be limited to CZK 29,000 per month per employee (the maximum amount being derived from the average super-gross wage, including mandatory contributions, i.e. based on CZK 48,400).
2. Inability to assign work to employees due to quarantine or childcare for a significant part of employees
- A significant part means 30% of employees of companies, establishments or other organisational units according to the operating situation of the employer. If 100% of the employee's wage compensation is paid, the employer will receive a contribution of 60% of the paid wage compensation, including contributions.
Based on the "Antivirus" scheme, the state will provide a contribution to the employer of 60% of the paid wage compensation, including levies. The maximum amount will be CZK 29,000. This maximum amount is derived from the average super-gross wage, including mandatory contributions, i.e. based on CZK 48,400.
General terms and conditions for eligibility for all "Antivirus" Programmes, i.e. Scheme A and Scheme B:
- concerns companies in the business sector; the employees must be working under employment contracts and participate in sickness (health) and pension insurance,
- the employer strictly observes the Labour Code,
- the staff member must not be in the notice period or dismissed,
- the employer must pay the wage and pay the levy,
- it will be necessary to distinguish the reason for the obstacle to work for each employee.
- the contribution can be drawn on compensation paid from 12 March 2020.
- schemes A and B have been extended until the end of May 2020 (period of eligibility of costs: 12 March 2020, including 31 May 2020).
- according to the resolution of the Government of the Czech Republic, scheme B will be extended until 31 August 2020.
Information for migrants concerning the validity of A1 form
The Czech Social Security Administration (CSSZ) assures migrants and, consequently, their employers, that a temporary change in the circumstances of their work (e.g. work in another state from home office, etc.) caused by restrictions related to COVID-19 (in particular the impossibility of crossing borders) is not a relevant change in circumstances justifying a change in the applicable legislation, i.e. the state where the person is insured.
This is the case if the parties are to continue with the previous work arrangement after the restriction has ended.
It is therefore not necessary to notify the CSSZ of such facts or to return the already issued Czech A1 forms. The A1 forms are still valid.
Other countries should also proceed in this way: Slovakia, Poland, Germany, Austria, France, Belgium, Luxembourg and Switzerland. To ensure the progress of individual states, we recommend verification on the website of the relevant foreign institutions.
Impact of the Double Tax Treaties on agreements
The OECD (Organisation for Economic Co-operation and Development) has made the following recommendations to address some of the tax implications of a temporary change in place of work or residence in the context of the pandemic:
Tax residence - If a cross-border employee was staying in a second state for only temporary pandemic-related reasons, he would not be considered a resident of a second state for the purposes of the DTAs (Double Tax Agreements).
Taxation of the financial compensation that compensate for wages – If an employer provides a cross-border employee with financial compensation, that income should be treated as income from employment and taxed in a country where the employee would normally work from.
- If employees temporarily work from home office in a state other than state of employer’s residence, this should not lead to the creation of a permanent establishment.
- Activities carried out by a dependent representative who temporarily contracts on behalf of a taxpayer from another state should not lead to the creation of a permanent establishment in the State in which those contracts are temporarily concluded.
- The temporary interruption of work on constructions and assembly projects should not interrupt the period for assessing the creation of a permanent establishment. That period is therefore included in the period determining whether a construction site is a permanent establishment.
These are the OECD recommendations based on the Treaty Model. It cannot be ruled out that some states will proceed exclusively under individual double taxation treaties and the temporary situation will not affect their approach to interpretation.
The Czech tax administration has not yet announced whether it will change its approach. So far, we need to follow the individual DTAs.