Compensation Bonus for self employed persons affected by the current Covid-19 situation UPDATE06
On May 7, 2020, the Government approved under bill no. 234/2000 the amendment of the Compensation Bonus Act, which introduced another instrument of support for self-employed persons whose business was negatively affected in connection with coronavirus. This extends the period for which the self-employed will be able to claim a bonus. Applications for bonuses for the period from March 12 to April 30 can be submitted by the self-employed already from 10 April 2020. In the event that self employed persons are interested in extending the compensation bonus support for the additional time period from May 1, 2020 to June 8, 2020 they will have to submit a new application. For those who have not yet applied for the first bonus period, then from May 7, 2020 onwards it is possible to submit both applications (for bonus periods one and two) on the one single interactive formula which the Financial Administration has published.
Who is the compensation bonus for?
The Compensation Bonus may be received by:
- a self - employed person who:
- pursued self-employment in 2020 as a principal or as an ancillary activity, but in such case (ancillary) only because of entitlement to disability pension, old-age pension, parental allowance, maternity benefit or care for the needy, or a dependent child
- also did not engage in an activity that would have the effect of participating in sickness insurance as an employee (beware, this includes, for example, statutory representatives or partners who received remuneration from which social and health insurance was paid). After the entry into force of the above-mentioned amendment to the Act, this condition will not apply to the performance of pedagogical activities, which will therefore not be an obstacle to obtaining a compensation bonus for self-employed persons.
- was self-employed as of March 12, 2020, or interrupted such activity from the day after August 31, 2019 (this option targets seasonal self-employed persons) could not perform this activity, in whole or in part, beyond the usual level due to health threats or emergency measures pursuant to Section 1, in particular for the reasons enumerated in the proposed Act.
In particular, the Act identifies as the reasons limiting or preventing the performance of self-employed activities:
- the need to close or restrict activities of a business establishment
- a quarantine imposed on a self-employed person or his or her staff
- caring for a child of the self-employed person or his or her employee as a barrier to work
- a reduction in demand for self-employed products or services
- a reduction or termination of supply by suppliers.
The self-employed person shall prove the fulfillment of the above conditions by means of an statutory self declaration (affidavit). The affidavit is an essential part of the application and the bonus will not be paid out without submitting it.
Compared to the original government proposal, the comparison of revenues for January - March 2020 in order to prove their decrease by 10%, as well as the minimum amount of revenues for the previous period corresponding to CZK 15,000 per month was omitted. These limits are no longer included in the law.
If someone has performed work on the basis of an agreement to perform work or work activities, he or she should check several facts. If he had such agreements concluded for a period that does not fall within the bonus period below, he will not deprive him of the option to receive that bonus. Similarly, these agreements are not an obstacle to obtaining a compensation bonus if the amount of remuneration did not exceed CZK 3,000 per month for an agreement on work activity and CZK 10,000 for an agreement to perform work.
How high is the compensation bonus and who pays it?
The compensation bonus will be paid by the tax authority upon receipt of the application. It is paid as a lump sum up to CZK 25,000, ie CZK 500 for each day of the bonus period in which the self-employed person has met all the conditions for awarding the bonus.
The first bonus period lasts from March 12 to April 30, 2020. Self-employed persons submit applications for CZK 500 for every day during this period, during which they could not perform their activities in whole or in part above the usual health risks or emergency measures.
The second bonus period applies from May 1 to June 8, 2020. The conditions for obtaining compensation bonus will be the same. What is important is that the self-employed will have to reapply for the bonus for this period and submit a new affidavit. As we state above, if someone has not yet applied for the first bonus period, then from 7 May 2020 onwards it is possible to submit both applications (for bonus periods one and two) on the one single interactive formula which the Financial Administration has published.
The act mentions a third period from June 9 to August 31, 2020, for which the government could pay the bonus through a government order. This option is intended in case the situation with coronavirus spread worsens and the gradual release of business activities needs to be slowed down.
In order to avoid the simultaneous granting of aid, entitlement to the compensation bonus does not arise for the day for which the applicant has received unemployment benefit. At the same time, there is no entitlement to unemployment benefit for the calendar day for which the person received the compensation bonus.
If the self-employed person has suspended his/her trade license at the Trade Licensing Office, the entitlement to a compensation bonus does not arise for the duration of the suspension. However, it is possible to simultaneously benefit from the compensation bonus and the "caretaker allowance" paid by the self-employed under another government measure. Equally, a compensation bonus and maternity cash benefit or parental allowance can be combined.
If a self-employed person receives benefits paid under the Act on Assistance in Material Need or the Act on State Social Support, he/she must be careful not to exceed the income limit, as the compensation bonus is an eligible income for determining entitlement to these benefits.
Cooperating persons are entitled to a compensation bonus under the same conditions as the self-employed. Their co-operation must therefore be the principal activity or, if it is an ancillary activity, the co-worker must not simultaneously be an employee who is involved in sickness insurance. The conditions of the cooperating person are assessed independently, independently of the self-employed, with whom they cooperate in the performance of the activity.
The advantage is that the compensatory bonus will be paid by the tax administrator even if the tax authority evidences a debt owed by the self-employed person. (the bonus is not included in the payment of the outstanding balance registered with the tax administrator). The compensation bonus is also not subject to execution. The bonus will be sent to the applicant in his / her bank account, which will be stated in the application.
The Ministry of Finance regularly updates frequently asked questions and answers on its website, some of which may be an interesting inspiration for assessing a specific situation.
When will it be possible to apply for the compensation bonus?
Applicants will be able to apply for the first compensation bonus period from 10 April 2020 and for the second bonus period from May 7, 2020. Importantly, the application must be submitted no later than 60 days after the end of the bonus period, which should be by 29 June 2020 for the first bonus period and by August 7, 2020 for the second bonus period.
Self-employed persons file the application with their local Tax Authority in the same way as they file their tax returns (the Tax Authority prefers an electronic application, but it can also be filed by mail or in person by delivering the application to the Tax Authority). In this context, the Chamber of Deputies approved an important amendment, which will also make it possible to submit this request by e-mail.
Self-employed persons can apply for a compensatory bonus through various forms published on the website by the Financial Administration. It is also possible to find instructions under the same link on how to fill in the application and the tax authorities' e-mail addresses to which self-employed persons can send their applications if they decide to apply by e-mail.
What happens if the self-employed person incorrectly assesses its eligibility for the compensation bonus?
As stated above, the compensation bonus will be paid on the basis of a solemn declaration by the self-employed person, in which the self-employed person confirms, inter alia, that "he or she was not able to perform this activity in whole or in part." The tax office can subsequently verify compliance with the statutory conditions.
If the tax office evaluates that the bonus was paid incorrectly, i.e. the self-employed person was not entitled to receive it in whole or in part, he will be obliged to return the amount of the bonus or its part and pay interest on late payment (16 and 15% pa, respectively, of the amount of the unduly received bonus for as long as it could dispose of it). It is therefore important to carefully assess the fulfillment of the conditions before applying. For practical reasons, each applicant should keep a record of how it has determined the level of impact on its business ("above normal") and its correlation with health threats or crisis measures due to the occurrence of coronavirus.
If someone subsequently finds that he or she has applied for the compensation bonus unjustifiably or has applied for the wrong amount, he should inform the tax office with which he applied. If he / she has already received the bonus, he / she must return the amount to the tax authority.
We will keep you informed on our blog of further details regarding the conditions for receiving the compensation bonus.