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News

Tax measures in connection with the coronavirus

11.05.2020
Company: Grant Thornton Tax & Accounting s.r.o.

Further measures supporting the economic situation in connection ith COVID-19

Dear Clients,

We would like to inform you of the news from the last few days concerning government measures in connection with the COVID-19 pandemic.

Cancellation of real estate acquisition tax

The government passed a bill which we informed you of in the previous tax alert, applying to the full cancellation of real estate acquisition tax of 4%. This law will be effective retroactively for deposits made from 1 December 2019. If anyone has already paid the tax, it will be refunded to them.

Compared to the original bill several changes have been made. The government passed the possibility of decreasing the income tax base by interest paid on mortgages for all housing real estate purchased up to the end of 2021. Deduction of interest on mortgages for real estate purchased after 1 January 2022 will be cancelled. This means that for real estate for housing needs which was registered in the real estate cadastre from December 2019 the acquirer will not pay the acquisition tax and, at the same time, will be able to deduct the mortgage interest from the tax base.

The government also decided to extend the time test for the exemption of tax on income from the sale of real estate, which was purchased for a reason other than own housing needs, from the existing 5 to 10 years (the original bill was for 15 years). The time test will be extended only for real estate purchased after the law comes into effect.

Extension of the Antivirus programme

The government passed the extension of the employment protection programme Antivirus by one month, i.e. until 31 May 2020. So employers whose obstacle to work will continue due to the COVID-19 pandemic will also be able to apply for compensatory wages for May.

We wish to draw attention to the gradual relaxation of the government measures which are having an impact on the gradual opening of individual business premises. From the date that it will officially be possible to open the business premises, but the employer does not open, for example because there is decreased demand for his goods or services, the employer will no longer be able to apply in regime A (80% of compensation for compensatory wages), but only in regime B (60% of ompensation for compensatory wages).

Crisis measures applying to the cross-border movement of workers (commuters)

The obligation has now been laid down for foreign commuters to be tested for COVID-19 every 30 days. Until now testing had been carried out in an interval of 14 days.

Carer’s allowance – increase for employees and the self-employed, now also possible for “job or work agreement” workers

In the last tax alert we also informed you of an increase in the carer’s allowance from 60% to 80% of the daily assessment base from 1 April 2020. Now a carer’s allowance has also been passed for “job or work agreement” workers. The law was signed by the president on 30 April 2020.

“Job or work agreement” workers” can apply for a carer’s allowance retroactively from the period of the extraordinary measures if the agreement was concluded before 11 March 2020, while compensation until the end of March will only be 60% of income. The condition is participation in sickness insurance in the month when the need to provide care arose.

The self-employed who had to interrupt their business activity after the closing of schools and other facilities to care for a child or a disabled person, will be able – just as employees – to receive a carer’s allowance until 30 June 2020. Likewise, the daily amount of “carer’s allowance” of the self-employed has increased to 500 CZK per calendar day, which will already apply to assistance for April. The government decided to adopt this measure on 4 May 2020. It will be possible to apply for assistance for April from 11 May 2020.

Business leases

On 27 April 2020 a law on some measures to mitigate the impact of the COVID-19 epidemic on lessees of business premises came into effect, which prohibits lessors during the protection period from April 2020 to 31 December to unilaterally terminate a lease only because the lessee is late in paying the lease for business premises if late payment arises from 12 March 2020 to 30 June 2020 as a consequence of the restrictions stemming from the extraordinary measure during the epidemic making it impossible or substantially difficult for the lessee to operate his business activity.

The law does not apply to payment of services. Non-payment of charges or prepayment of services may continue to be a reason for terminating a lease. Lessors will have to pay VAT from unpaid lease on the due date even if they have not received any payment from the lessee.

The government also passed the plan of the Ministry of Industry and Trade on 4 May 2020 to contribute to payments made by entrepreneurs affected by the restrictive and preventive government measures for business premises leases in the form of a subsidy programme.

The COVID – LEASE subsidy programme plans for the state, in the form of a subsidy, to pay lessees half of their total lease for the period of April to June 2020 (maximum of 20 million crowns). This provided that the lessee submits confirmation from the lessor in the form of an amendment to the lease agreement that he granted the lessee a discount of 30% of the amount of the lease. So the lessee would only pay twenty percent of his lease. However the ministry has not yet disclosed the specific parameters of this support for entrepreneurs.

Suspension of ERS until the end of the year

The electronic registration of sales has currently been suspended for a period of 3 months after the end of the state of emergency (currently until 19 August 2020). However on 4 May 2020 the government passed the bill of the Ministry of Finance which extends the suspension of the ERS for all entities until the end of 2020. The amendment to the law is now being delivered to the Chamber of Deputies which will discuss it in the state of emergency legislation.

Support of members of limited liability companies

As a follow-up to the “Twenty-Five” Programme for the self-employed, the government has roposed providing direct support also to members of limited liability companies. This on condition that the company has no more than two members or with more members who are the members of one family (direct relatives). In addition, the applicant may not be an employee (anywhere other than in “his” limited liability company) and may not claim support as a self-employed person.

Another condition is turnover of at least 180,000 CZK for 2019 or an estimate of attaining such a turnover in 2020 or 2021. The applicant must be an active member of the company as at 12 March 2020 and must also be a resident of the Czech Republic, EU or EEA.

The decisive period for a claim to the payment of a subsidy is the same as for the Twenty-Five Programme, i.e. from 12 March to 8 June 2020. The amount of the subsidy is 500 CZK for each day of the decisive period, a maximum of 44,500 CZK.

The bill will be discussed this week in shortened proceedings as part of the state of emergency legislation by the Chamber of Deputies and then by the Senate. Just as the Twenty-Five Programme for the self-employed, so this programme will also be administered and funds be paid out by the Financial Administration, which will begin to accept applications once the law comes into effect, which is expected to be during the course of next week.

Postponement and decrease of insurance premium payments

It is proposed allowing employers postponement of insurance premium payments for the calendar months of May 2020 to July 2020, until 20 November 2020. If the employer makes additional payments of the due premium within the specified period, it will only pay a decreased penalty of 0.01% (instead of the normal 0.05%) for each day of late payment, i.e. about 4.5% (for the July premium paid in November) – 7.5% (for the May premium) p.a.

This bill only applies to premium paid for the employer while the obligation to deduct and pay premium for the employee remains.

It is also being proposed to decrease the premium for June, July and August 2020 for employers whose year-on-year revenues fall in 2020 by at least 15% (option I), 30% respectively (option II). The premium would be paid from an assessment base reduced by up to 40% with a fall in revenues by at least 15%, by 80% respectively with a fall in revenues by at least 15%, whereas the maximum decrease in both options will not exceed 80% of the average wage. The bill will be discussed by the government in the next few days.

Decrease of VAT rates to 10%

This change does not explicitly apply to the extraordinary situation related to the COVID-19 pandemic nevertheless we consider it important to inform you of this change to VAT rates as well, which should represent a positive contribution to decreasing or maintaining consumer prices.

As of 1 May 2020 the significant decrease will come into force in VAT to 10% for a whole range of goods and services as listed below.

There has been a decrease from 21% for:

~ repair of footwear and leather products

~ repair and adjustment of clothes and textile products

~ repair of bicycles

~ hairdressing and barber services

~ electronic books and audio books

~ lending of books

~ sale of draught beer as part of catering services

There has been a decrease from 15% for:

~ treatment and supply of water through the supply network

~ drainage and purification of wastewater including other services related to these activities

~ colouring books, maps

~ indoor premises cleaning services and window cleaning in homes

~ home care of children, the elderly, sick and disabled

~ catering services and serving of beverages

 

We will keep you regularly informed of any further measures adopted in connection with the current extraordinary situation.

Grant Thornton Tax & Accounting s.r.o.

Jindřišská 16

110 00 Praha 1

Jiří Zoubek

Tax Partner

+ 420 296 152 111

jiri.zoubek@cz.gt.com

Pavel Humplík

Tax Partner

+420 296 152 111

pavel.humplik@cz.gt.com

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