The current situation affects all companies and businesses. The Government is promising direct assistance of approximately CZK 100 billion and guarantees of an additional CZK 900 billion. What specific aid can you use now?
1) COVID direct aid
One of the tools to support the Czech economy in connection with a pandemic is direct aid in the form of COVID programmes. Through the ČMZRB (Czech-Moravian Guarantee and Development Bank), the interest-free COVID I loan was provided. However, this support ended because the funds were exhausted and replaced by COVID II.
The COVID II programme is again under the auspices of the ČMZRB and consists of an 80% bank guarantee and subsequently a possible contribution to the interest paid in connection with the secured loan. The guarantee covers loans to overcome the economic crisis and is used to cover operating costs (e.g. wages, energy, rent, etc.). In view of the enormous interest in supporting COVID II, the first round of applications has already been completed. The interest in support was so great that it was closed within three hours because the limit for the first round, i.e. CZK 1.5 billion, was exhausted. On the same day, the limit was increased and the acceptance of applications was reopened. On the second day the first round was closed. The fate of the COVID II programme is not yet known, and any further round will be announced based on a decision of the Ministry of Industry and Trade. Nevertheless, the tendency of the state is to support economic entities in overcoming this difficult situation and we can assume that its support will continue. We expect to announce additional rounds for COVID II or other programmes with similar terms and conditions, which will also apply to establishments in Prague or large companies. According to the Minister of Industry and Trade, the COVID programme will be announced around Easter with support amounting to CZK 4-5 billion for Prague.
If you are interested in state aid and have failed to apply for an interest-free COVID I loan or a bank guarantee with a contribution to the interest paid, we recommend that you prepare for the possible application and the necessary documents, as it can be assumed that their content will be similar, if not the same, and that great interest will once again lead to a rapid closure of applications.
So how do we prepare? Acceptance of support applications is currently pending, so we cannot determine the unambiguous procedure. However, based on previous programmes, first check that you qualify for support. These include, for example, the condition of the size of the enterprise, the line of business, the purpose and location of the use of funds from the loan, etc. In addition, check that your property is not subject to distraint or that you do not have arrears against state institutions such as tax authorities, health insurance companies, social security administrations, customs offices, etc. If you notice arrears and the financial situation does not allow you to pay them, ask for a delay or payment schedule. If the application is accepted, arrears will be considered settled and the condition of indebtedness towards state institutions is fulfilled. One of the conditions is also not to record arrears due to your employees' wage claims. Arrears from wages or from state institutions are not an obstacle to receiving support only if they arose after 1 March 2020 due to problems arising from the spread of coronavirus.
It may be restrictive for some entities that they have benefited from de minimis aid in the past, as the COVID programme is paid out of these funds and its maximum amount may not exceed EUR 200,000 over a three-year period (current and the two previous accounting years).
If the Ministry of Industry and Trade issues another round, have a pre-approved loan for which a COVID II bank guarantee is required. At the same time, fill in the application and other attachments that are on the ČMZRB website. If you do not use them under COVID II, they may be useful under another COVID programme, as the required information may be similar.
The terms and conditions of COVID II support can be found on the ČMZRB website, but also on our website and, if necessary, we are at your disposal to consult about the procedure or whether you qualify for support.
2) Measures in the area of loan repayment
The act under discussion should allow loan repayments to be postponed by three or six months. The postponement is not across the board and it is therefore necessary to ask for it.
The law applies to loans that were taken out and drawn before 26 March 2020. These are loans secured by real estate, right to immovable property or dedicated loans relating to real estate.
The Act does not apply to loans for which the debtor has been in default for more than 30 days as at 26 March 2020, overdraft loans, loans intended for trading in investment instruments, loans where the debtor is a pension company or loans for the lease of goods or leasing, for which the obligation to purchase the subject of the contract is not agreed or other possibility of acquiring title after a certain period of time. Likewise, the Act does not apply to deferred payment or financial guarantee, etc.
Credit repayments may be deferred for up to six months until 31 October 2020. However, if the debtor does not wish to benefit from this six-month deferral, they may apply for a three-month deferral until 31 July 2020. The deferral of instalments will start to apply the month following the debtor's notification to the creditor. The duration of the loan is extended by this period by deferment of instalments. The creditor is entitled to interest for the period of deferred instalments. If the debtor is a business, the interest is in the amount agreed. In the case of consumer loans, the maximum interest is the repo rate set by the Czech National Bank increased by eight percentage points.
The debtor should notify the creditor of its decision to postpone the instalments in writing or by any other means specified by the creditor for the purpose of such notification. This method of notification should be readily accessible with use of funds remotely. If the creditor fails to make such a method available, notification may be made by any means where the debtor has a record that it has made a notification to the creditor. The notification should include the debtor's designation, a statement that the debtor wishes to benefit from a deferral of repayments due to the negative economic impact of the COVID-19 pandemic, and the credit designation. If the borrower has more loans to the lender, the borrower does not indicate all loans. Notification will apply to all loans between them. The creditor will acknowledge receipt of the deferral notice to the debtor. They will inform the debtor of the date of commencement and end of the deferral of instalments and of the amount, number and frequency of payments to be made by the debtor after the expiry of the deferral period. If the notification does not meet the requirements, the creditor will invite the debtor to remedy the defects of the notification.
The request for deferment of instalments is free of charge. Until 31 October 2020, the creditor will not be entitled to payments agreed or fixed in the event of default in payments under the credit agreement. However, this does not apply to legal entities. Legal entities cannot dispose of assets that could serve to satisfy the creditor while the instalments are deferred.
3) "Kurzarbeit" and the Antivirus programme as state aid in the form of wage compensation
On 31 March 2020, the Government of the Czech Republic approved resolution No. 353 Targeted Programme to Support Employment called "Antivirus" pursuant to Section 120 of Act No. 435/2004 Coll., on Employment, as amended. The main objective of the Antivirus programme is to help companies protect jobs, reduce redundancies and mitigate the negative effects of the worldwide spread of COVID-19.
The Antivirus programme is intended for all employers whose wages are not covered by public budgets. The programme is implemented by the Labour Office of the Czech Republic and consists in the partial reimbursement of the total wage compensation paid to employees for the period of obstacles to work from 12 March to 30 April 2020. The Antivirus programme responds to the situation where obstacles arise for the employee (quarantine order, childcare) or the employer (order to close or restrict operations, restricted supply, sales, absent employees, etc.). The Antivirus programme recognises two schemes (Scheme A, Scheme B), which differ as regards the reason for the obstacle that affects the amount of the contribution.
- Scheme A – Forced traffic restrictions and quarantine: This scheme concerns the closure or limitation of operations on the basis of a crisis measure or a quarantine order by the competent authority (the Government of the Czech Republic, Ministry of Health, etc.). The contribution under Scheme A is 80% of the wage compensation. Scheme A covers the following situations:
- Employee ordered to stay in quarantine – The employee is not working because he or she has been ordered to stay in quarantine. This is an important personal obstacle on the part of the employee. This is the same as in the case of temporary incapacity for work, where the employee receives wage compensation of 60% of the average reduced earnings paid by the employer for 14 days.
- The closure of operations and the impossibility of assigning work to employees in connection with the issuance of a crisis measure by the competent authorities - This is the case when the employer is ordered to close or restrict operations on the basis of a government resolution on the adoption of emergency measures or on the basis of emergency measures of public health protection authorities. In such a case, if the employer had to close or restrict its operations and activities, this is another obstacle on the part of the employer and it is obliged to pay employees 100% of the employee's average earnings for the entire duration of the obstacle.
- Scheme B - Related economic difficulties – This scheme applies to obstacles on the part of the employer arising from the related economic difficulties caused by the spread of COVID-19. The contribution under Scheme B is 60% of wage compensation.
- These are mainly cases where the employer cannot allocate work to employees, because a significant number of employees is missing either due to quarantine or nursing, or is forced to reduce operations due to a decrease in input supplies (raw materials, semi-finished products, services, etc.) or reduced demand for its products or services. In this case, the employee is paid wage compensation of 60-100% of the average earnings as stated in the employer's internal regulation (directive). It is necessary to acquaint employees with the internal regulation and to prove this acquaintance by signing the directive, or another demonstrable method of informing employees. Signature sheets linked to the directive, demonstrable sending by e-mail, publication on the intranet or other available place (notice board at the terminal for working hours registration) can be used. In any case, it must be demonstrated during the inspection by the Occupational Safety Inspectorate that employees have been informed of this Directive.
The Antivirus programme has two steps. The first was launched on 6 April 2020, when it was possible to complete the first part of the application (registration, identification). The second part, where the actual entitlement to the aid will be quantified, will be launched from 9 April 2020, and the application will only be made after the payment of wages. The employer is obliged to deliver the quantification of the claim (bill) no later than the end of the calendar month following the expiration of the reported monthly period. The second part will also take place through the portal of the Labour Office.
4) Reliefs and refunds for self-employed persons
Restrictions imposed by the Government or the Ministry of Health directly or indirectly affected a large portion of self-employed persons. Given that self-employed persons are an important part of the Czech economy, the state is trying to help these entities in overcoming this difficult period. The aid consists of both monetary and non-monetary forms. Let us look at what relief and reimbursements apply to self-employed persons.
a) Social insurance and health insurance premiums waived
All self-employed persons are exempt from minimum social security (pension) and health insurance payments for the period from March to August 2020, regardless of whether the self-employed works is a the person's main or secondary activity (for 2020: social insurance CZK 2,544, health insurance CZK 2,352). This amount is completely waived and will not have to be reimbursed at a later date. Thus, there is support in the form of unpaid premiums, the total amount of which can be up to CZK 29,376.
For self-employed persons who pay minimum advances, this means that nothing is paid.
For self-employed persons who pay advances higher than the minimum can choose whether to pay the difference between the advance payment and the minimum amount in each month or to not to pay any advance at all, this eventually resulting in a higher outstanding balance of premiums in the annual accounts. If the self-employed person chooses the second option, he or she will not be penalised for the unpaid difference. Practically, this means that self-employed persons do not have to pay any advances on health and social insurance between March and August 2020.
If you already paid a deposit for March, you do not have to worry about having paid it unnecessarily. The amount paid will be used for the premiums for September 2020. Although pension contributions are forgiven, the period of March to August 2020 is treated as paid and is included in the pension entitlements period.
The only mandatory levy is the payment of sickness insurance for voluntarily insured self-employed persons.
b) Subsidies for nursing a family member
During the extraordinary measures, a self-employed person can apply for a subsidy for nursing a family member in the amount of CZK 424 per day. A self-employed person caring for a child under the age of 13 who is unable to attend school or other childcare facilities due to closure in connection with coronavirus is eligible for the subsidy. The subsidy may also be drawn by a self-employed person who takes care of a member of the household who is dependent on help and whose condition has been determined by a doctor. The grant is applied for each calendar month separately and the application, which can be found HERE, must be filled in on the website of the Ministry of Industry and Trade. The completed application may be submitted to the Ministry of Industry and Trade by data box, by e-mail with an electronic signature or by post, the applicant sending signed originals.
An applicant for a subsidy must meet the following conditions:
- when submitting the application for a subsidy and throughout the period when the subsidy is drawn, the applicant must be self-employed as their main activity and be unable to perform this activity due to the care of a family member;
- the applicant must be a small or medium-sized business;
- the applicant must be registered as a payer of income tax at the tax office,
- the applicant must have no arrears to selected state institutions (e.g. tax office, social security authority, health insurance companies, etc.).
c) Compensation bonus
This week the Chamber of Deputies approved the much-discussed compensation bonus. The original proposal was extended and the result of the parliamentary meeting of 7 April 2020 is that more traders will reach this bonus. The compensation bonus is intended for self-employed persons who perform their main or secondary activity due to:
- receiving an invalidity or retirement pension;
- entitlement to parental benefit or maternity benefits;
- continuous preparation for future occupation (studies up to 26 years).
A self-employed person who, due to health threats or crisis measures, could not fully or partially carry out their activities to the normal extent due to:
- closure of the establishment or restriction of its operation;
- quarantine of self-employed persons or their employees;
- childcare or childcare in the case of their employee;
- reduced demand for their products or services;
- restriction or cessation of supplies or services required for the performance of the activity
can claim a compensation bonus.
The amount of the compensation bonus is set at CZK 500 for each day of the bonus period, which is from 12 March to 30 April 2020. In total, a self-employed person can receive up to CZK 25,000. This bonus is exempt from tax and is therefore final.
The compensation bonus is applied for at the self-employed person's local tax authority for income tax. In addition to general information, the application must include a solemn declaration on the fulfilment of the conditions for entitlement to the bonus and the bank account where the amount is to be paid. The bonus application can be submitted by standard means and in this case also by e-mail without electronic signature. If you opt for an e-mail, take a picture of your own signed or scanned request and send it as an attachment.
d) Other options
Self-employed persons are also subject to other concessions and benefits, which are described in our other articles. These include, for example, the so-called liberal tax packages, the Antivirus programme (for self-employed persons who employ workers), postponement of rent, suspension of repayment of loans and mortgages, or the COVID programme.
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