COVID-19 MANUAL: Tax relief for self-employed persons
With regard to the fact that a growing number of new acts and decisions to reduce the negative impact in relation to the COVID-19 disease continues to appear at present, we are issuing a summary document, in which you will find an overview of the currently applicable measures for self-employed persons (“OSVČ”) in the area of taxes and statutory insurance, and we will also point out some not yet approved but already proposed relief. All of the measures stated below are a reaction to the current situation and they are intended to help self-employed persons to at least partially compensate the negative impact of COVID-19.
Personal income tax
1. automatic waiver of the fine for late submission of the income tax declaration for the taxable period of the year 2019, including automatic waiver of the late payment interest and the interest on the postponed amount of this tax
- the condition for the waiver is that the income tax declaration for the year 2019 is submitted by 1 July 2020 at the latest.
- in case of the tax declaration for the taxable period of 2019, the deadline for submitting the tax declaration is not postponed, but there is a waiver of sanctions in case this submission is made by 1 July 2020
2. waiver of the June prepayment for the personal income tax
- entrepreneurs do not need to pay the income tax prepayment for the calendar year 2020 payable on 15 June 2020
- they will only settle the tax when submitting the tax declaration for the year 2020 by 1 April 2021 (or by 1 July 2021 in case of submitting the tax declaration via a tax consultant)
3. proposed introduction of retroactive tax loss deduction, the so-called “Loss Carryback”
- for the time being, this is a measure, which is being discussed and may undergo a number of changes in the course of the process of approval
- the legislation will probably enable subtracting from the tax base a finally determined tax loss or its part in taxable periods, which began in the period of 2 years before the beginning of the period, for which a tax loss is assessed, or in the period of 5 to 6 years after the end of this period (this issue is still subject to discussion); tax loss for the calendar year 2020 could thus also be subtracted for the calendar years 2018 and 2019, by means of submitting an addition tax declaration for this period
- it will probably be possible to deduce tax loss from the tax base only up to the total of partial tax bases according to article 7 to 10 of the ITA
- in case of using retroactive tax loss deduction, the time limit for tax assessment will probably be prolonged by the period, for which the tax loss was assessed and for which the tax loss or its part was used as an entry deductible from the tax base (in case of applying tax loss of the year 2020 in an additional tax declaration for the year 2018, the time limit for the declaration for the calendar year 2018 would thus be up to 1 April (or on 1 July, respectively) 2029 (or even 2030)).
Health and social insurance
1. public health insurance premium
- self-employed persons are obliged to submit the Survey of income and expenses of self-employed persons by 3 August 2020 at the latest, and the tax underpayment is due within 8 days
after the day, on which it was or should have been submitted
- prepayments of insurance up to the amount of insurance calculated
from one twelfth of the minimum base of assessment (i.e. the minimum monthly prepayments) for the period of
beginning of March 2020 to the end of August 2020 are not paid by self-employed persons, and they do not need to request waiver of these prepayments
- self-employed persons, who pay higher prepayments, are only obliged to pay the difference between their insurance prepayment and the minimum prepayment (reaching CZK 2352) for the period of March to August 2020 (the self-employed person may nevertheless decide to pay the prepayments by means of an insurance underpayment within 8 days after the day, on which the survey for the year 2020 was or should have been submitted)
- insurance prepayments, which the self-employed person would have paid for the period from March 2020 to August 2020, are considered paid up to the amount of insurance premium calculated
from one twelfth of the minimum base of assessment (saving of CZK 14,112) - in the survey for the year 2020, the self-employed person will thus subtract from the calculated insurance premium not only the actually paid prepayments, but also the “waived” prepayments for the period of March 2020 to August 2020 reaching the amount of CZK 14,112
- the penalty relating to insurance premium, which incurred in the period from the beginning of March to the end of August, will not be assessed (the penalty, which is an accessory of insurance originally due within the protective period, will begin to incur on 22 September 2020 at the earliest)
2. Social security insurance premium and contribution to the state employment policy and pension insurance
- the deadline for submitting the survey of self-employed persons for the year 2019 has been moved to 3 August 2020 (according to the information published by the Czech Social Security Administration on its website), and until this time, the underpayment of pension insurance premium for the year 2019 must also be paid, in order for sanctions to be waived
for late submission of the survey;
- self-employed persons are not obliged to pay insurance premium prepayments
for pension insurance and contribution to the state employment policy for the calendar months in the period of March to August 2020
- in the survey for the year 2020, the self-employed person may subtract
from the calculated insurance premium not only the actually paid pension insurance prepayments in the year 2020, but also the minimum prepayments, the payment of which was waived for the period of March 2020 to August 2020 (i.e. CZK 15,264 for a self-employed person performing primary self-employed activity or CZK 6,108
for a self-employed person performing self-employment as a secondary activity, if in these months the self-employed activity was performed for at least a part of the month)
- the period, during which self-employed persons will not pay prepayments
for pension insurance will continue to be included into pension insurance as
a so-called excluded period
- the relief does not apply to voluntary sickness insurance, which must be paid in the standard way
3. Introduction of “caregiver allowance” for self-employed persons
- The “caregiver allowance” for self-employed persons will be paid and requests will be accepted by the Ministry of Industry and Trade
- there is entitlement to caregiver allowance for a self-employed person performing primary self-employed activity, which cannot perform its business activity due to looking after a minor, who has not reached the age of 13 years, for the duration of school facilities or other facilities for children being closed based on a resolution of the government of the Czech Republic
- the amount of the subsidy, or “caregiver allowance” reaches CZK 424 per day
- the request for “caregiver allowance” for March 2020 needs to be submitted by 30 April 2020
1. Road tax
- waiver of the late payment interest and the interest on the postponed sum, which incurs in prepayments of the road tax due by 15 April 2020 and 15 July 2020, if these prepayments are paid by 15 October 2020 at the latest
2. Value added tax
- waiver of the fine for not submitting a control report, if the obligation to pay a fine incurred in the period from 1 March 2020 to 31 July 2020 (this fine is waived automatically without request)
- with the exception of the above-mentioned waiver of fine for late submission of a control report, in all other cases it is always necessary to submit an individual request of related sanctions and proves that the cause for the omission were reasons related to the spreading of the coronavirus
- within the so-called Liberation package II, there has also been a general waiver of VAT on charge-free supplies of some protective equipment and other goods relating to the spreading of the SARS-CoV-2 virus and charge-free supplies of material used for their production (goods supplied in this way in the period from 12 March 2020 until the end of the state of emergency.
3. Real estate acquisition tax
- waiver of the fine for late submission of the real estate tax return with a deadline for submission between 31 March 2020
and 31 July 2020, if the tax declaration is submitted by 31 August 2020
- waiver of late payment interest or interest on the postponed real estate tax relating to real estate acquisition tax or its prepayments with a due date from 31 March 2020 to 31 July 2020, if the tax or the prepayment of the tax are paid by 31 August 2020 at the latest
A draft bill governing entitlement to a compensation bonus for self-employed persons was approved by the Chamber of Deputies on 7 April 2020 are it now needs to be approved by the Senate and signed by the President as well.
Conditions for entitlement to the compensation bonus:
- Self-employed person performing primary activity
- Self-employed person performing secondary activity, but the self-employed person must not be an employee at the same time (i.e. for example a self-employed person, which receives old-age or disability pension, parental allowance or is a student under the age of 26 years, is entitled as well)
- The self-employed person was active as of 12 March 2020, or interrupted its activity at any time after 31 August 2019 (seasonal enterprising)
- The self-employed person will declare that it was fully or partly unable to perform this activity beyond the normally expected level as a result of risk to health or in connection with the emergency measures of the government (especially due to one of the following reasons, such as the duty to close down business premises or limit their operation, quarantine of the self-employed person or its employee, looking after a minor, limitation of demand for products or services provided by the self-employed person, or limitation or termination of supplies or services necessary for performance of activity). The self-employed person will substantiate fulfilment of these facts with a statutory declaration.
The amount of the compensation bonus reaches CZK 500 per every calendar day of the bonus period, the bonus 12 March to 30 April 2020.
A request for the compensation bonus may be submitted within 560 days after the bonus period has ended, at the latest.
The compensation bonus will be administered as a tax according to the Code of tax Procedure.
It is expected that the bonus period may be prolonged until the end of the month of May 2020.
Electronic records of sales
- cancellation of the obligation to fulfil obligations under the EET act excepting the obligation of treating authentication data, the certificate for record of sales and the receipt pad in such a way as to prevent their misuse, until the date of termination of the state of emergency declared on 12 March 2020;
- cancellation of the recording obligation and the obligation of placing an information announcement in the period of 3 months from the date of termination of the state of emergency declared on 12 March 2020 (the above-mentioned stipulation affects taxpayers, who already recorded sales before the beginning of the state of emergency, as well as postponing the last stage of EET implementation).
We continue to monitor the situation relating to taxes and statutory insurance and we will inform you about further changes.