21st October 2020

Compensation bonus for the self-employed and small limited liability company members is back

The compensation bonus will again be provided to self-employed persons, members of small limited liability companies (having no more than two members, or family businesses as limited liability companies) and persons performing work outside employment (based on agreements to perform work or agreements to complete a job) whose activities were banned or restricted by the government as a result of the state of emergency declared on 5 October 2020. The bill is yet to be passed by parliament and signed by the president.

The compensation bonus is proposed to amount to CZK 500 for every calendar day of the bonus period (i.e. the state of emergency from 5 October 2020 to 4 November 2020). The maximum compensation bonus amount for the entire period of 31 days may thus reach a total of CZK 15,500. The bill also takes into account the possibility of another compensation bonus period, should the state of emergency be prolonged beyond 4 November 2020.

In contrast with the compensation bonus distributed to the self-employed in spring of this year, the current form of compensation is less general, with an increased focus on the affected sectors of the economy. Entrepreneurs entitled to the bonus should only be those whose dominant source of income in the relevant period from 1 June to 30 September 2020 was generated from a segment directly banned or curtailed by the government, i.e. mainly restaurant services and the organisation of congresses, educational events, trade fairs, culture and sports, etc. The fact that a self-employed person is also participating in the sickness insurance scheme as an employee should no longer be a problem; however, such activity must not be of a prevailing nature.

The government is also planning to provide compensation to entrepreneurs whose business activities were not directly banned or curtailed but who deliver goods, services or other outputs to entrepreneurs whose activities were banned or curtailed by the government’s emergency measures. These involve entrepreneurs whose activities were in direct symbiosis with the closed sectors of the economy. This group of entrepreneurs should be entitled to the compensation bonus on the condition that, as a result of government measures, at least 80% of their business activity was rendered impossible; the income from this activity constituted the entrepreneur’s major source of income that cannot be easily replaced with any other; and, simultaneously, it must have been impossible to provide the relevant outputs to somebody else without major difficulties.

According to the bill, the entitlement to the compensation bonus should also be granted to persons performing work based on an agreement to complete a job or an agreement to perform work, carrying out work for the above entrepreneurs if they participated in the sickness insurance scheme as employees for at least three of the four months of the decisive period (i.e. between 1 June 2020 and 31 September 2020).

The bill also stipulates other conditions that must be fulfilled to be entitled to the compensation bonus. These conditions are similar to those that were in effect in the spring. Among other things, the law requires that self-employed persons have trade licenses that are valid as at 5 October 2020 or have had their activity suspended after 12 March 2020, with this suspension still in effect on 5 October 2020.

The compensation bonus should be paid out based on an application and an affidavit on meeting the statutory conditions filed with the tax authority with local jurisdiction, in writing or via a data box within two months of the end of the bonus period.

Iva Krákorová ikrakorova@kpmg.cz+420 222 123 837

Lenka Nováková lnovakova@kpmg.cz+420 222 123 364

Members of the American Chamber of Commerce in the Czech Republic