Compensation Bonus for self employed persons - UPDATE03
The Compensation Bonus Act was published in the Collection of Laws on April 14, 2020, which provides another support tool for self-employed persons whose business has been negatively impacted by coronavirus spread. Based on a number of comments, the original government proposal from the Ministry of Finance has been revised to expand the range of potential applicants. This article sets forth for whom the support is targeted, what form it will take and how to apply for it. Although the law came into force on 15 April 2020, since Friday 10 April entrepreneurs can submit relevant applications.
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
- was self-employed as of 12 March 2020, or interrupted activity from the day after 31 August 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
- reduction in demand for self-employed products or services
- reduction or termination of supply by suppliers.
The self-employed person shall prove the fulfillment of the above conditions by means of an affidavit.
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. On the other hand, none of the amendments tabled by members of parliament, such as expanding the range of potential applicants for persons working to work or work agreements, increasing or extending the bonus payout period, etc., were accepted.
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 one-time payment of up to CZK 25,000, i.e. CZK 500 for each day in the period from 12 March to 30 April 2020 in which the self-employed person was compliant with all the eligibility requirements.
Self-employed persons therefore receive CZK 500 for each day in the period from 12 March to 30 April 2020 in which they were not able to carry out their business entirely or in part due to the emergency measures.
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.
However, it is possible to benefit from the compensation bonus and the "nursing" paid by the self-employed on the basis of another government measure.
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 to his / her bank account, which will be stated in the application.
When will it be possible to apply for the compensation bonus?
Applicants will be able to apply for the compensation bonus after the Act takes effect, which should be no later than 15 April 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.
Self-employed persons will 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). The application is unlikely to have a special pre-printed form, but the Tax Authority has promised to publish an optional template on its website.
Self-employed persons can apply for a compensatory bonus through forms published on their 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 the self-employed 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 the penalty (20% of the amount of the bonus) and 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.
We will keep you informed on our blog of further details regarding the conditions for receiving the compensation bonus.