COVID-19 MANUAL: Tax relief for companies and employers
In the endeavour to reduce the economic effects related to the spreading of the SARS-CoV-2 virus, the Finance Ministry continues to publish various measures, for the purpose of helping taxpayers to handle the situation. For the time being, let us leave aside the ruminations, whether or not the approved or the proposed measures for companies or small traders are sufficient, and let us focus on what tax relief companies, traders and employers can use to lower their current levy obligations towards the state.
In the abundance of continually published new information, which sometimes changes day by day, the tax measures may appear confusing. In this article, we will thus focus on a comprehensive overview of what taxpayers can already use now, in order not to get into difficulties with their cash flow, and what intended changes are being considered.
The already published articles on this subject can be found on the website of Fučík & partneři in the “Coronavirus - COVID-19” section available at http://www.fucik.cz/en/topics/coronavirus-covid-19/. This website contains all important information and options for how to react to the situation that has occurred, not only from the perspective of taxes and levies. Here you can find for example information on employees and the options for how to proceed in situations, when impact on contractual relations occurs as well.
1. Corporate income tax
A taxpayer liable to corporate income tax may currently use the options of postponement of payments, waiver of fines and penalties. A draft bill is currently also being prepared, according to which it retroactive use of tax losses would be possible.
1.1 Income tax prepayments and their waiver
The taxpayer does not need to pay a prepayment due on 15 June 2020 (2nd prepayment in case of a payer of quarterly prepayments, 1st prepayment in case of a payer of half-yearly prepayments). This is not a waiver of the tax obligation, but only of the prepayment, which will be offset against the potential tax obligation after the end of the taxable period.
How is it in case of taxpayers, who use a fiscal year?
If the taxpayer uses a fiscal year and wants to also use a waiver of prepayments, the taxpayer is obliged to submit an individual request for determining prepayments differently according to article 174 of the Code of Tax Procedure, where he will state the reason for requesting a waiver of prepayments (for example in relation to extraordinary events). With regard to the liberation packages, this request will not be subject to an administrative fee.
How to proceed in case of prepayments for the third or fourth quarter of the year?
Waiver of prepayments for other quarters is not being considered at present. Yet, the income tax prepayments due on 15 September and 15 December can be “waived” as well (by determining prepayments differently), based on a submitted individual request of the individual taxpayers, similarly to taxpayers, who use a fiscal year.
1.2 Underpayment from tax return for last year (2019)
The Finance Ministry has enabled submitting the corporate income tax declaration by 1 July 2020 at the latest, without sanctions for late submission and late payment of tax (for the taxpayer, no fine for late tax statement, no late payment interests and no interest on the postponed sum of this tax will be assessed) – this is a so-called “general pardon”. The same applies to the personal income tax return.
You can find more information in the article here.
What to do, if the deadline has already expired and the taxpayer has not submitted the tax return and the “general pardon” did not apply to him, for example due to using the fiscal year?
In such a case it is possible to submit an individual request for waiver of the fine for a late tax statement. It is necessary to state the reason why this omission occurred, however (most frequently in connection with the coronavirus). Typically this may be an illness, quarantine of the accountant or other key employees, whose absence prevented fulfilment of the tax obligation.
What to do, if the deadline has not expired yet, but the taxpayer knows already that he will not manage to submit tax return on time and the general pardon does not apply to him, for example due to using the fiscal year?
In such a case it is possible to submit an individual request for postponement of the tax or its division into instalments to the financial office. In this case, too, it is necessary to state the reason in connection with coronavirus.
1.3 Retroactive use of loss (“Loss Carryback”)
A new separate act is the planned introduction of a completely new concept of the so-called “Loss Carryback”, or retroactive use of tax loss, both in terms of the personal and the corporate income tax for the year 2020. In other words, if the taxpayer posted a tax obligation in the year 2018 or 2019 and tax loss in the year 2020, it will be possible to offset this loss against the tax base for the year 2018 and 2019.
It is certain at present that there will be a certain form of “Loss Carryback”, but what it will be specifically is not known by now. We will inform you, as soon as further details are known, but for the time being, it is certain that some problematic areas need to be resolved, for example the impact on the time limit for tax assessment. From the information available, we can presume that in case of posting loss for the year 2020 the taxpayer will probably have the option of using this loss not only in the following 5 years (or 6 years – this issue is still being discussed), as an entry lowering the tax base, but also retroactively - in taxable periods that began two years before the beginning of the taxable period, for which the loss was posted, i.e. for the year 2018 and 2019. On the understanding that first it will probably be necessary to lower profit from the year 2019 and if the posted loss is higher than profit in the year 2019, the loss will also be used in the year 2018, and if the posted loss is higher than the profits of 2019 and 2018 combined, then there is of course the standard option of using this loss in the following 5 years (or 6 years, respectively – see above). It should be possible to use loss for the year 2020 for the taxable period of 2025 at the latest (or 2026 – see above).
2. VALUE ADDED TAX (“VAT”)
In the area of value added tax, relief applies to waiver of fines and late payment interests.
2.1 Waiver of the fine for late submission of control report
If the taxpayer submits a control report late, the tax administrator will automatically waive the fine of CZK 1,000, but only on the condition that the obligation to pay it incurred in the period between 1 March and 31 July 2020. This will usually be a situation, when the taxpayer submits a control report after the deadline, but before receiving summons from the tax administrator to submit it.
How to proceed in case of another fine related to the control report being imposed?
Based on an individual request, a fine may be waived for the taxpayer on other grounds of late submission of the control report resulting from summons issued in the period from 1 March to 31 July 2020, reaching CZK 10,000, CZK 30,000 or CZK 50,000. The fine will only be waived if it is proven that the infringement of obligations occurred as a result of the emergency measures. Submitting this request will not be subject to any administrative fee until 31 July 2020.
You can find more information in our article here:
2.2 Waiver of the fine for late submission of the VAT return
If the taxpayer submits the VAT return after the deadline, including late payment of the tax, he has the option of submitting an individual request, based on which in specific cases the related sanctions for late submission and payment of tax may be waived for him.
If we summarise the relief relating to the value added tax, it needs to be emphasized that with the exception of the above-mentioned waiver of fine for late submission of a control report reaching CZK 1,000, in all other cases it is always necessary to submit an individual request of related sanctions and prove that the cause for the omission were reasons related to the spreading of the coronavirus.
You can find more information in our article here:
3. Suspension of the obligation of electronic record of sales (“EET”) for entities that come under all stages of EET
For the duration of the state of emergency (that is currently from 12 March 2020 until the day this state of emergency is terminated, i.e. until 30 April 2020 at minimum), the obligation to fulfil obligations according to the EET act is cancelled. An exception is the obligation for the entity to handle authentication data, the certificate for records of sales and the receipt pad so as to prevent their misuse. Following this, the obligation to record sales and the obligation to place an information notice is cancelled for the period of three months from the date, on which the state of emergency declared on 12 March 2020 is ended.
In connection with EET, there is also a factual postponement of the final stage of the electronic record of sales by three months, by means of a tolerance zone. From 1 May, the financial administration has undertaken to proceed with the maximum possible tolerance to potential findings, so that in this period it will only fulfil a consulting function and will not impose any sanctions, in case a newly registered entrepreneur does not manage to prepare for the recording obligation in time.
4. Other taxes and levies
4.1 Real estate acquisition tax
General waiver of the fine for late submission of the real estate tax return and the late payment interest and the interest on the postponed sum applies to all tax declarations that should have been submitted between 31 March 2020 and 31 July 2020. This waiver can only be applied on the condition that the tax return is submitted (and the related tax is paid) by 31 August 2020. Factually, this waiver will apply to real estate acquired (entered in the Land Register) after 1 December 2019.
4.2 Road tax prepayments
Road tax payers may postpone the payment of prepayments due by 15 April 2020 and by 15 July 2020. Such a postponed payment will not be subject to any sanctions on the part of the tax administrator. The waiver applies only in case these prepayments are actually paid by 15 October 2020 at the latest.
4.3 Health and social insurance paid for employees
There is currently no option for postponement and waiver of sanctions for social and health insurance levies, nor is any form of such relief expected to be approved at present. This statement has one exception, when penalty will not be demanded for late payment of health insurance levies until 21 September 2020, (this does not apply to insurance premium for February 2020, which was due by 20 March 2020). In connection with the payment of social and health insurance, it needs to be emphasized that regular payment of health and social insurance is required as a conditions for payment of potential refunds by the state.
In case an employee is in quarantine, the same regime is applies as of the employee were ill. For payment of reimbursement of wage, the employee must present a document from a doctor, which proves quarantine being imposed, or from a hygiene station (which also imposes quarantine). Based on this document, the employer will present reimbursement of wage for 14 days to the employee. In such a case, the wage is as high as in case of the employee's temporary incapacity to work (illness).
5. The “Antivirus” Programme
Employers can currently request a contribution from the Antivirus programme. Antivirus is intended for employers, who are obliged to pay reimbursement of wage to their employees, while not being able to do so as a result of the measures adopted in connection with the coronavirus. The rules applicable at present do not help employers, who have managed to assign work to employees despite a decrease in demand, and pay them wages for it. Creation of another regime “C” is currently being discussed, which would apply to companies that continue their activity and their production has decreased as a result of the current situation.
At present, the Antivirus programme consists of two regimes, regime “A” and “B”:
- “A” quarantine and forced closure of premises
The contribution reaches 80% of the reimbursement of wage increased by levies, the maximum monthly contribution per one employee reaches CZK 39,000. This is a situation,
- when quarantine is imposed on the employee and the employer must pay reimbursement of wage until entitlement to sick benefits arises, or
- the employer was ordered to close down the premises and reimbursement of wage is being paid to the employee.
- “B” related economic difficulties
This is a situation, when a significant proportion of the employees is not available for the employer, for example due to illness or on grounds or looking after a minor or limitation of inputs. In regime “B”, the amount of contribution reaches 60% of reimbursement of wage raised by levies, and the maximum amount of contribution per one employee reaches CZK 29,000.
You can find details about this programme in the article here.
In case you are interested, we will be happy to help you with the above-mentioned areas and with potential requests. With regard to the fact that due to the declared state of emergency legislation changes within several days, it is possible that the above-described situations will not be final. We will continue to monitor this area for you.