ENTREPRENEURS AND BUSINESS RELATIONS

LAST UPDATE ON October 14, 3 p.m.

Impact of the measures against the pandemic to contractual obligations – in general

May the changes related to the governmental measures and coronavirus pandemic justify increase or decrease of contractual price or other changes in contractual conditions?

It is not possible to unilaterally change the price or other conditions if there is no gross disproportion between the performance of the parties and the parties did not exclude the application of Sec. 1765 or Sec. 2620 (2) of the Civil Code (excluding of these provisions result into assuming the risk of change in circumstances).

May the changes related to the governmental measures and coronavirus pandemic justify the failure to fulfil obligations arising from contracts?

Coronavirus, or more precisely the measures associated with it may justify the failure to fulfill obligations arising from contracts if they constitute so-called force majeure and the parties have thus agreed in the contract. If there is no force majeure clause in the contract, the provisions of the law can be used – if a party has been temporarily or permanently prevented from fulfilling his contractual duty due to an extraordinary, unforeseeable and insurmountable obstacle created independently of his will, such party is not obliged to compensate the damage.

May the changes related to the governmental measures and coronavirus pandemic justify the termination of obligations from contracts?

Governmental measures concern a variety of activites and as such may cause the termination of contractual obligation due to impossibility to perform such obligation. This however applies only on condition that the performance cannot be provided  under more difficult conditions, at higher costs, with the help of another person or only after a determined period. Some performance may also become illegal.

Other measures related to entrepreneurs

Currently effective reliefs and help to entrepreneurs

Extension of Antivirus A program

  • 100% of the salary, including levies, will be reimbursed, up to the amount of 50,000 crowns
  • for the period staring on October 1

Rent compensation for business premises

  • for entrepreneurs who have been prohibited from operating in leased premises
  • contribution of 50% of the rent for the third quarter of this year
  • is not conditioned by a discount provided by the landlord

Continuation of the COVID-culture program

  • contribution of up to 50% of eligible expenditure for relocated or canceled cultural events and up to 80% of eligible expenditure for continuous development in the field of culture
  • different periods between 1 March and 31 December 2020 are set for individual contributions
  •  one-time form of 60,000 crowns is intended for individuals, entrepreneurs can apply for up to ten million crowns within eligible costs

Continuation of the COVID-sport program

  • compensation for professional clubs to cover the costs of canceling a sporting event for the period from March to the end of this year
  • compensation for commercial organizers of sporting events for the general public to cover in vain the costs associated with the events, which were to take place from 12 March to 31 July this year
  • events that had to be canceled in autumn are not included

Support for carriers

  • compensation for tour operators for losses suffered from the beginning of the state of emergency in March to the end of June
  • the amount is determined by the number of seats and days, together with the ecological class of the vehicle, a maximum of 135 crowns per day

Travel agency support

  • compensation of 500 crowns for each canceled trip due to a pandemic, which was purchased from December 1 last year to October 1 this year
  • tourist guides can receive compensation of up to CZK 50,000

Tax reliefs

  • postponement of all VAT, income tax and road tax payments from 14 October until the end of the year
  • for entrepreneurs with a predominant field of activity, which is directly affected by government restrictions

Deferral of repayment of loans

  • Act No. 177/2020 Coll.
  • possibility of deferral of loan installments for the protection period (from the first calendar day of month following the notification day until July 31, 2020 or until October 31, 2020), based on a written request sent to the loan provider
  • the deadline for repayment of debts is extended by the duration of the protection period
  • concerns the loans concluded and drawed down before March 26 provided by an entrepreneur (i.e. not only by banks)
  • does not concern interest, which must be paid by legal entities in the amount and at the time agreed in the loan agreement (difference from natural persons)
  • not applicable to overdraft, revolving loan, operating lease, financial and bank guarantees, deferred payments, energy payments and ICT services (exceptions are in Sec. 3)
  • does not apply to loans that have been longer than 30 days late on March 26, 2020

Other reliefs and help to entrepreneurs

Lex Covid

  • Act No. 191/2020 Coll.
    • temporary reliefs for legal persons (facilitation of internal functioning)
    • pardon of the failure to comply with the time-limit for carrying out an action in various legal proceedings
    • changes in the execution (enforcement) law
    • changes in insolvency law

Programs for support of business

  • COVID I, COVID II and COVID III – program for support of self-employed and small and medium enterprises
  • COVID Plus – guarantees by EGAP – Export Guarantee and Insurance Corporation – for companies with more than 250 employees with export amounting to at least 20% of tota earnings, the maximum amount corresponds to 25% of the yearly turnover (ranging between CZK 5 mil. to 2 bil.)
  • COVID-Ubytování – compensation amounting to CZK 100–330 per room/night to accommodation services providers for the period between 14 March to 24 May 2020
  • COVID-Nájemné – state subsidy for entrepreneurs to rent for their establisments in the amount of 50 %, maximum amount of subsidy is CZK 10 mil., it is for the period between 1 April to 30 June 2020. The lessor must provide at least 30% discount on the original rent.
  • COVID-Kultura – reimbursement of the maximum of 50% recognizable costs of cancelling cultural and creative events (details are available here)
  • COVID-Ubytování – support for the accommodation services providers per room/night depending on quality of provided services (CZK 100-330/night)
  • Czech Rise Up (and Czech Rise Up 2.0) – the aim of this program is to support quick introduction of new solutions which may help to fight the coronavirus) (for more information click here – only in Czech)
  • Technologie COVID 19  – support for small and medium-sized enterprises to procure medical devices to fight the coronavirus (for more information click here – only in Czech)
  • Innovation Vouchers COVID-19 – support for small and medium-sized enterprises – forthcoming subsidy for the purchase of advisory, expert and support services from knowledge organizations and accredited laboratories in the field of innovation / fight against COVID-19
  • The Country for the Future – public tender – subsidy for introduction of organizational and process innovations in relation to COVID 19 risks
  • Extension of deadlines for calls for OP PIK – extension of deadlines for acceptance of applications for all calls whose acceptance was not completed by March 17, 2020 and does not exceed the deadline of April 30, 2020 by 30 days

Tax measures/reliefs (more information is available at the website of Financial Administration)

1. Liberation package No. 1

  1. general pardon of penalty and late interests for belated submission of income tax return of natural and legal persons until July 1, 2020 (possibility to file income tax return and pay this tax without any sanction up to 3 months later, without having to prove reasons related to coronavirus)
  2. pardon of penalty for belated tax declaration in all cases where the tax subject is individually pardoned of paying the late interest, or cases of respite, payment schedule, or penalty for failure to submit control report in relation to coronavirus (applicable to all tax subjects, i.e. natural persons and entrepreneurs)
  3. general pardon of penalties for belated submission of control report in the amount of CZK 1,000 which occured between March 1 and July 31, 2020
  4. an instruction will be issued by the General Financial Headquarters to allow individual pardon of penalties for failure to submit control report for the period between March 1 and July 31, 2020 (in case there is a link to the coronavirus)
  5. general pardon of administrative fee for filing the following applications (must be filed until July 31)
    1. application for deferrment or payment schedule of tax,
    2. application for remission of late interest
    3. application for remission of penalty for failure to submit control report

2. Liberation package No. 2

  1. pardon of June advance payment on natural and legal persons’ income tax (advance payment for June shall not be paid at all)
  2. general pardon of penalty for belated submission of tax return for acquisition of real estate / for belated payment of tax for acquisition of real estate / advance payment on this tax (concerns all such belated tax returns with a deadline in the period from March 31 to July 31, 2020)
    1. tax return must be filed no later than on August 31, 2020 in order to avoid sanctions
    2. late interests or interest on deferrment of tax for acquisition of real estate will be pardoned in these cases
  3. introduction of the Loss carryback institute (retroactive effect of tax loss) for natural and legal persons’ income tax for 2020 – it will redeemable in the tax returns for 2019 and 2018
  4. Suspension of the obligation to electronically evidence sales for subjects falling into all phases of electronic evidence of sales (during the state of emergency and the following 3 months)

3. Liberation package No. 3

  • pardon of fine and interest for late payment of income tax for natural and legal persons, if the return is submitted by 18 August 2020 (if the return is not submitted by this date, the penalty is calculated from the statutory deadline, i.e. on 1 April for natural persons and 1 July for legal persons)
  • pardon of sanctions for late payment of real estate acquisition tax due between 31 April and 30 November 2020, the tax return will be filed by 31 December 2020
  • pardon of VAT fines if the submission is made by 31 August 2020
  • please see the Financial Journal 9/2020

Other tax reliefs

  • reduction of the VAT rate for accommodation services and admission to sports and culture from 15% to 10%
  • reduction of the road tax rate for vehicles over 3.5 tonnes by 25%, retroactively from the beginning of 2020 (leads to a reduction in this year’s advances)
  • VAT pardon for selected protective equipment, disinfectant solutions and other goods
  • reduction of the tax base for entrepreneurs by expenses incurred for gratuitous non-monetary benefits intended to combat the pandemic in the period between 1 March and 31 May 2020
  • introduction of a meal voucher flat rate from January 2021 (simpler and cheaper alternative to today’s regime, the meal allowance will be provided directly in cash, without payment to the meal voucher broker)
  • abolition of real estate acquisition tax with retroactive effect from December 2019, the tax paid in the meantime will be refunded

Suspension of the obligation to electronically record sales for entities in all phases of EET

  • for the period of state of emergency and the following three months

Reliefs for self-employed

  • pardon of the pension insurance payments
    • state shall pay for self-employed persons the advance payments for pension insurance contributions and state employment policy contributions for the calendar months from March to August 2020
  • pardon of the public health insurance payments
    • state shall pay for self-employed persons the advance payments for public health insurance for the calendar months from March to August 2020 
  • nursing for self-employed
    • during the period the school are closed
    • applications are accepted from April 1 to April 30
    • CZK 424 per day in quarantine / family member care, CZK 500 per day starting from April 1
    • further conditions are specified here
  • compensation bonus for self-employed
    • one-time tax bonus in the amount of CZK 500 per day
    • further information is here
  • flat tax for small entrepreneurs
    • introduction of a flat tax for self-employed persons with an annual income of less than CZK 800,000 who are not VAT payers
    • starting from from 1 January 2021, the entrepreneur may choose to pay only one lump sum in the amount of CZK 5,740 instead of 3 separate levies (income tax, social and health insurance contributions)
    • registration makes it impossible to apply other tax rebates and reliefs

Measures to support agriculture

  • the aim is food self-sufficiency (PGRLF, Rural Development Program)

Emergency package from the Ministry of Foreign Affairs

  • aid to Czech exporters provided by the Ministry and embassies (free of charge)
  • details are here

Antivirus Program – regime A

  • concerns the previously proposed regimes A and B, i.e.
    1. quarantine of employees
    2. ordered (by emergency measures) restriction or shutdown of employer’s operation
  • the employer shall receive 80% of employees’ average earnings including the health and social security insurance contributions (from the super gross salary)
    • but no more than CZK 39,000 per one employee/month

Antivirus Program – regime B

  • concerns the previously proposed regimes C, D and E, i.e.
    1. absence of significant number of employees
    2. “dead” time (inavailability of inputs)
    3. partial unemployment (decrease in demand for employer’s good/services)
  • the employer shall receive 60% of employees’ average earnings including the health and social security insurance contributions (from the super gross salary)
    • but no more than CZK 29,000 per one employee/month

Deferral and pardon of social security contributions

  • so called Antivirus C regime
  • details are available here

Package for carriers

  • deferral of toll payment for the period between April 1 and July 31, 2020
  • postponement of road tax advances until 15.10.2020

Package for support of culture

  • approved by the Government, CZK 1.07 billion to be distributed
  • details are here (in Czech only)

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