ENTREPRENEURS AND BUSINESS RELATIONS

LAST UPDATE ON August 4 11 a.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

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

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

Deferral of business premises rent payment

  • Act No. 210/2020 Coll.
  • should apply to the lease and sublease of premises for the purpose of operating business or usufructuary lease
  • protection period until December 31, 2020
  • must be a result of the restriction arising out of an extraordinary measure (solely, not largely)
  • after the circumstances giving rise to the emergency measures (at the earliest after the end of the state of emergency) have ceased to exist, the lessor may request the cancellation of the lease if it cannot be required from him to tolerate the restriction
  • the lessee must pay the deferred rent within the protection period, if he fails to pay, the lessor may terminate the lease within 5 days; the lessor may also terminate if the lessee declares that he will not pay the debts
  • in case the lease is terminate during the protection period – payment must be made within 30 days
  • lessee shall submit documents certifying compliance with the reason for non-payment (due to extraordinary circumstances) within 15 days from the first day of the delay with the rent payment

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)
  • 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)

Restrictive measures

State of Emergency

  • effective from March 12 to May 17
  • for the whole Czech Republic

Ban on entry of foreigners into the Czech Republic

  • protective measure of the Ministry of Health (ref. No. starts as MZDR 20599)
  • obligation on people who have stayed more than 12 hours in the last 14 days in the territory of a state where the risk of COVID-19 is increased to undertake a test for the infection by SARS-CoV-2 (The list safe countries available here)
  • number of exceptions
  • further conditions and rules are set out by the Ministry of the Interior available on their website

Restriction of free movement of persons and mass events

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 20588)
  • general prohibition has been cancelled – currently only selected events/fields are regulated
  • ban on outdoor events with number of participants over 1000, indoor events with number of participants over 500
  • obligation to protect respiratory tract at events with number of participants over 100

Prohibition of free movement for persons not wearing respiratory protective equipment (mouth and nose)

  • general prohibition on the entire territory of the Czech republic has been cancelled – currently restrictions apply only in selected regions
  • extraordinary measures of individual regional hygienic station (Prague region, Ústní nad Labem region, Moravian-Silesian region)

Prohibition of personal school attendance

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 20584)
  • schools are planned to be fully open from the beginning of the school year under the hygiene rules and standards

Prohibition of retail sale and sale of services in establishments

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 20581)
  • conditions set for specific types of sale

Prohibition of visits in healthcare facilities and social services facilities

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 12614)
  • specific rules for healthcare facilities in which on-board medical care is provided

Adding coronavirus to the list of contagious human diseases

  • concerns criminal acts of Spreading of Contagious Human Diseases (whether willful or out of negligence)
  • punishments are prison sentence from 6 months to 12 years (willful) or up to 10 years (negligence)

Prohibition of re-export of medicines delivered to the Czech Republic

  • currently set out by Governmental Regulation No. 104/2020 Coll., as amended by Governmental Regulation No. 146/2020 Sb Coll.

Restriction for recipients and providers of social services

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 20593)
  • suspension and restriction of servises provided for client aged over 50 y.o.

Use of soldiers and customs officers

  • currently set out by Governmental Regulations (No. 83/2020 Coll., No. 318/2020 Coll.)
  • rescue work and assistance to the the Ministry of Health and regional higienic stations in managing SARS-CoV-2 epidemic
  • to fulfil tasks of the Czech Police when ensuring internal order and safety with the aim of protecting lives, health and property of persons and for compliance with safety measures related to the SARS-CoV-2 pandemic

Ban on prescribing the medicine Plaquenil

  • extraordinary measure of the Ministry of Health (ref. No. starts as MZDR 12756)

Information regarding České dráhy, a.s. (Czech Rails)

  • limited operation (details are here)

Limitation of operation of Česká pošta, s.p. (Czech Post)

  • partial limitation of operations in selected regions of the Czech republic (details are here)

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