“Liberation Tax Package 2”, and other governmental measures and regulations

01. 04. 2020

Authors: David Krch, Martin Bureš, Lucie Čirková

Dear Clients, Dear Business Friends,

We bring you updated information regarding the measures adopted by the Government of the Czech Republic (the “Government”) in connection with the COVID-19 pandemic.

Please note that in addition to “Liberation Tax Package 1” the Government has adopted a list of measures referred to as “Liberation Tax Package 2”. In addition, amended regulations concerning the insurance of self-employed persons (“sole proprietors”) and concerning the (electronic) sales records (“EET”) were published in the Collection of Laws on 27 March 2020. All these measures have introduced further relief for tax-payers.

Below please find details regarding those measures:

“Liberation Tax Package 2”

Waiver of the advance payments in respect of the personal income tax and the corporate income tax due in June. Tax-payers will not be obliged to pay the income tax advance due on 15 June 2020, without the need to submit a special application. Please note that the waiver does not apply to tax-payers whose income tax advance falls due on 15 April 2020 or 15 May 2020. In those cases, an individual application may be filed requesting a different timing for tax advance payments.
General waiver of the fine for late filing of the tax return in respect of the tax on the acquisition of immovable property, due to be filed between 31 March and 31 July 2020, and general waiver of late payment interest (or of the charge for tax deferral) charged for a late payment of the tax on the acquisition of immovable property or of an advance in respect of that tax. Hence, tax-payers may in fact file the tax return in respect of the tax on the acquisition of immovable property (such as structures, houses, flats, land plots, garages, etc.) and pay that tax by 31 August 2020 at the latest without any penalty.
Suspended obligation to (electronically) record sales for tax-payers covered by all stages of EET (and the duty to place an informative notification) as of the date of promulgation of the amendment in the Collection of Laws (i.e. as of 27 March 2020) for the duration of the state of emergency and the subsequent three months. Nevertheless, the relevant tax-payer recording sales (electronically) is still obliged to handle the authentication data, the certificate for (electronic) sales records, and the sales receipts in a manner such as to prevent their misuse.
Introduction of loss carry-back. Payers of personal income tax (“PIT”) and of corporate income tax (“CIT”) will be able to carry back their tax loss for 2020 in additional tax returns for the years 2019 and 2018. The precise mechanism will become known after the adoption of an amendment to the Income Taxes Act.

Social security payments by sole proprietors

All sole proprietors, irrespective of whether they engage in gainful activity as their principal or ancillary activity, are fully exonerated of the obligation to pay social security advances in the period from March 2020 to August 2020. In this case, the amount of prescribed social security advances is irrelevant. Sole proprietors are not required to apply for a waiver of advance payments.
In case a sole proprietor has already paid the social security advance for March 2020, that payment will be first used towards payment of due and payable liabilities, and then towards social security advance payment for September 2020 and/or for subsequent months.
In the Sole Proprietor Return for 2020, sole proprietors may deduct from the calculated insurance payment the social security advances actually paid in 2020 (i.e. advances for January, February, and September through December 2020), and also the minimum advances, the payment of which has been fully waived for the period from March 2020 to August 2020 (i.e. CZK 15,264 for sole proprietors conducting principal gainful activity, and CZK 6,109 for sole proprietors conducting ancillary gainful activity).
The period of time for which sole proprietors will not make any social security advance payments will count towards the social security scheme as an “exempt” period.
Sole proprietors who make voluntary payments in respect of sickness insurance continue to be obliged to make those payments.
The Czech Social Security Administration authority has published information on its website that the deadline for submitting the Sole Proprietor Return for 2019 is postponed to 3 August 2020, provided that the balance payment in respect of the outstanding social security amount for 2019 must be remitted by that deadline in order to avoid penalties for a late filing of the Return.

Health insurance (“HI”) payments (not only sole proprietors)

Sole proprietors who pay minimum advances in respect of HI are released from the payment obligation for the period from March 2020 to August 2020 (these advances are considered as duly paid). Sole proprietors are not required to apply for a waiver of advance payments.
Sole proprietors who make HI advance payments in an amount higher than the minimum advance will only be required to pay HI advances in the period from March 2020 to August 2020 in an amount equal to the difference between the calculated advance and the minimum advance of CZK 2,352 per month. However, a sole proprietor may make partial payment of HI advances, without a penalty, in an amount equal to the calculated advance and the minimum advance only after filing the Sole Proprietor Return for 2020.
In the Sole Proprietor Return for 2020, it is possible to deduct from the calculated insurance payment the HI advances actually paid in 2020 (i.e. advances for January, February, and September through December 2020), and also the minimum advances the payment of which has been fully waived for the period from March 2020 to August 2020 (i.e. CZK 14,112 for sole proprietors engaging in gainful activity).
The deadline for submitting the Sole Proprietor Return for 2019 is postponed to 3 August 2020. Please note that, unlike social security, the balance payment in respect of the outstanding HI amount for 2019 must be remitted within 8 days of the date on which the Sole Proprietor Return was or should have been filed.
In addition, penalties are waived in respect of late payment of HI advances or of HI itself (e.g. for employers) for a period from 1 March 2020 to 31 August 2020 if paid on or before 21 September 2020. HI advances or HI paid after 22 September 2020 will be subject to penalisation.

Miscellaneous

For all data box users, the sending of data messages is currently free of charge (as of 24 March 2020 until further notice, at least for the duration of the state of emergency).

In addition to the foregoing, below please find a brief summary of several practical impacts of “Liberation Tax Package 1” based on the Q&A published by the Revenue Administration Authority on their website (available here).

If the tax return in respect of PIT is filed after the “deferred” deadline (i.e. after 1 July 2020) and/or the balance payment is made in respect of this tax after that date on the basis of such tax return, the tax authority will assess a penalty (i.e. a fine for a late filing of the tax return and/or late payment interest) as of the original deadline for filing the PIT return, i.e. as of 1 April 2020.
The deadline for settling withholding taxes (“Settlement”) has not been extended, and the regular deadline of 1 April 2020 applies. If the Settlement is filed on or before 1 July 2020, the penalty for late filing will be waived. If tax for the taxation period of the year 2019 is paid on or before 1 July 2020, late payment interest will be waived.
Settlement of employment income tax had to be performed by the regular deadline, i.e. 20 March 2020.
The deadline for the submission of the CIT return by legal entities with their fiscal year from 1 October 2018 to 30 September 2019 whose financial statements have to be audited is 1 April 2020. Nevertheless, in a situation where there is a delay in the filing of the CIT return and payment of the tax in connection with coronavirus, it is possible to submit an individual application for waiver of late payment interest for reasons attributable to coronavirus. If such waiver is granted (in full or in part), the penalty for the late filing of the CIT return is also automatically waived on the basis of the “general pardon”.
With regard to legal entities whose taxation period is different than the calendar year (i.e. 1 February 2019 – 31 January 2020; 1 March 2019 – 29 February 2020) and their deadline for filing a tax return falls on a date after 1 April 2020, in the event of a late filing of the CIT return, the penalty for the late filing of the CIT return is automatically waived on the basis of the “general pardon”. In addition, late payment interest, if any, is also waived in respect of late payment of the income tax, on condition that the CIT return is filed on or before 1 July 2020 and the tax is paid by the same date, i.e. on or before 1 July 2020.
It is still possible to file an application for determination of advances in a different amount by following the procedure under Section 174(5) of the tax code retroactively, i.e. for example in respect of tax advances that were payable as of 15 March 2020. We suggest considering this possibility in case you have not yet paid this advance, because the approved waiver of tax advances under “Liberation Tax Package 2” only applies to the income tax advance due and payable as of 15 June 2020.

If you have any further questions in this respect, please feel free to contact us.