Czech Republic
Languages

COMPLEX INFORMATION SERVICE – COVID-19

How can we help you? | Our latest COVID-19 Newsletters | Contact | RSM Global Coronavirus Resource centre

Dear Clients,

In these difficult times, we would like to reassure you, your loved ones and your businesses of our strong support.

The coronavirus pandemic is causing uncertainty around the whole world, and many Czech businesses and entrepreneurs are facing unprecedented challenges. Both the government and individual ministries have regularly been announcing many business support measures, and we will continue to provide you with useful information about the key areas of interest, such as tax relief, employment-related measures, financing and business continuity.

We have prepared this information service for you with a collection of previously issued reports dealing with the relevant issues, but also a list of areas in which we can help you. Please do not hesitate to contact us with any questions you may have.

#staysafe

What is your situation?

Do you know what the real options for receiving funding from programmes related to the measures taken against COVID-19 are?  We have prepared for you an updated overview of which funding programmes are available for entrepreneurs and what their current status is:

COVID II programme
The first round of applications for the COVID II Guarantee Programme, intended for small and medium-sized enterprises outside Prague, closed on 3 April 2020 at 11:59 p.m. The Českomoravská záruční a rozvojová banka (Bohemian-Moravian Guarantee and Development Bank, ČMZRB), as the provider of guarantees in this programme, is now in touch with individual applicants and is evaluating the applications. By the end of May 2020, CZK 10.6 billion of guaranteed loans had already been approved. The next round will be announced on a date decided by the Ministry of Industry and Trade.

Who the programme is for:
    • Only for small and medium-sized enterprises (no more than 250 persons; either their annual turnover must be below EUR 50,000,000 EUR or their annual balance sheet total below EUR 43,000,000) from outside Prague (their production facility must be outside Prague; headquarters may be in Prague)
Parameters of the COVID II programme:
  • The Bohemian-Moravian Guarantee and Development Bank will guarantee loans from CZK 10,000 to CZK 15,000,000
  • The guarantee that is provided will cover up to 80% of the commercial loan
  • Applicants will also be able to draw a financial contribution of up to CZK 1,000,000 to pay interest (if they arrange an interest-bearing loan)
  • The duration of the guarantee is three years
  • The guaranteed commercial loans can be used exclusively to cover operating expenses (salaries, rent, power supplies, invoices from suppliers, material, stock, etc.).

COVID Plus programme

This programme is sponsored by the Ministry of Finance together with the Ministry of Industry and Trade and Exportní garanční a pojišťovací společnost, a.s. (Export Guarantee and Insurance Company, EGAP).

After approval by the European Commission and further specification of the detailed conditions by the corresponding act and government regulation, the programme was launched on 5 May 2020. The Covid Plus programme is intended for large employers whom it helps maintain the liquidity that they need to keep their operations going and for the development of export companies. The government has already allocated the first CZK 4 billion for assistance provided through guarantees. The programme’s total insurance capacity is CZK 330 billion. The programme was developed in coordination with the banks who will be evaluating the applicants.

Who the programme is for:
  • Applications may be submitted by companies in which the proportion of total sales of exported goods and services in 2019 was at least 20%; this includes production deliveries to other exporters
  • For companies with at least 250 employees (also applies to economically connected groups)
  • The programme is not intended for companies which were in existential difficulties before the state of emergency was declared.
  • Neither is it available to companies whose primary economic activity consists of services in transport, accommodation, tourism or gambling.
Parameters of the COVID Plus programme:
  • The guarantee can also be provided for loans used for operations, working capital, refinancing or restructuring of a current loan or investment
  • Guarantee period: three years for working capital loans and up to five years for investment loans
  • The maximum limit for the loan is 25% of total annual sales of products and services in 2019 – CZK 5 million minimum (CZK 5 million – CZK 2 billion)
  • EGAP will cover the principal up to 80%

COVID III

Following up on the COVID II programme, the ČMZRB launched the COVID III programme. The program was approved on 18 May 2020 and CZK 150 billion was set aside for it. The program is intended for self-employed and for entrepreneurs with up to 500 employees, whose economic activities are limited due to the coronavirus infection and related preventive measures. Loans are provided by cooperating commercial banks. The entrepreneur therefore applies in the form of a loan application to a bank that has a portfolio guarantee agreement with ČMZRB for the COVID III Program.

Who is the program for:
  • For self-employed and companies with up to 500 employees in the Czech Republic, including Prague
  • The applicant does not postulate other public support, de minimis aid for the same guaranteed loan and the guaranteed loan must not be supported by a directly managed European Union instrument,
  • The applicant does not apply for support in the COVID Plus program
Parameters of the COVID III programme:
  • The warranties offered are as follows:
    • Up to 90% of the principal of a guaranteed loan for companies with up to 250 employees
    • Up to 80% of the principal of a guaranteed loan for companies with 250 to 500 employees
  • The maximum amount of the guaranteed loan may not exceed CZK 50 million
  • The duration of the warranty is max. 3 years
  • The agreed maturity of the loan may not be before 1 January 2021, with the exception of loans agreed for an indefinite period.
What can a guaranteed loan be used for?
  • Reimbursement of operating expenses (wages, rent, energy, supplier-customer invoices, materials, supplies, etc.)
  • Acquisition of small tangible or intangible assets
  • Acquisition and financing of supplies or materials.
To provide guarantees from ČMZRB and EGAP, it is first necessary to contact the bank that confirmed its participation in the program with an application for a loan!
  • The list of participating banks is available on the ČMZRB and EGAP websites, but it is assumed that all commercial banks that finance entrepreneurs will be involved.
What to watch out for?
  • When financing wage costs with a loan guaranteed by ČMZRB, it automatically disqualifies applicants for participation in the Antivirus program.
  • Applicants at ČMZRB may also not draw public support within the COVID Plus program.
  • Similarly, applicants for a guarantee from EGAP may not use another instrument of public financing support linked to the Covid-19 pandemic (provided in the form of loan guarantees or interest rate subsidies).
Employers may apply at the Employment Office for a contribution to the wage compensation paid to employees from 12 March to 31 August 2020, using either of the two schemes below. The contribution shall be requested for each month separately and the respective application shall be submitted by the end of the following month i.e.
  • For the month of March, the application shall be submitted by the end of April
  • For the month of April, the application shall be submitted by the end of May
In terms of subsidy applications, you are required to assess correctly whether your company qualifies for the subsidies or not. There are two schemes: A and B; see below. It is also necessary for the company to process wages according to the “rules” of the Labour Code. You can find out more about the conditions for obtaining Antivirus subsidies in our COVID-19 Centre. Once the subsidies have been paid, inspections will be conducted by the Employment Office of the Czech Republic to determine whether the wage compensation was correctly paid and whether the employer had met the criteria for its being awarded. Intentional misuse of the contribution may be classified as a crime. Employers should also comply with the following points, which the inspectors from the Employment Office may focus on
  • Correct registration of working hours
  • Medical examination of employees
  • Calculation of wage claims of employees according to the rules of the respective health insurer
  • No debt
  • Illegal schemes of employment designated as “švarcsystém” and others
1. Subsidy schemes Scheme A
  • In the event of quarantine, employees receive compensation of 60% of their average reduced earnings
  • If a business is closed by a government regulation, employees receive compensation of 100% of their wage
Amount of contribution under scheme A
  • The amount of the contribution is 80% of the wage compensation, including statutory levies, paid by the employer to the employee for the duration of the obstacles to work.
  • The employer shall therefore provide in the statement the amount of wage compensation paid and the part of the statutory levies that corresponds to the amount of the compensation paid. The contribution of the Employment Office then equals 80% of the sum of these amounts.
  • The maximum monthly amount of the contribution per employee is CZK 39,000.
Scheme B
  • Obstacles to work on the employer’s side as a result of an ordered quarantine or child care for a significant proportion of employees (30% and more) – employees receive compensation of 100% of their average earnings
  • Limited availability of inputs (raw materials, products, services) required for the business activity – employees receive compensation of 80% of their average earnings
  • Reduced demand for the company’s services or products – employees receive compensation of 60% of their average earnings
Amount of contribution under scheme B
  • The amount of the contribution is 60% of the wage compensation, including statutory levies, paid by the employer to the employee for the duration of the obstacles to work.
  • The employer shall therefore provide in the statement the amount of wage compensation paid and the part of the statutory levies that corresponds to the amount of the compensation paid. The contribution by the Employment Office then equals 60% of the sum of these amounts.
  • The maximum monthly amount of the contribution per employee is CZK 29,000.
2. Submission of application
  • The employer shall submit the application for a contribution via the Antivirus website of the Ministry of Labour and Social Affairs HERE (in Czech)
  • The employer shall send the application to the respective Employment Office according to the registered office of the company
  • Obligatory documents accompanying the application:
    • proof of opening an applicant’s account to which the Employment Office shall be sending the funds and proof of the employer’s representation (by an authorized individual)
    • power of attorney granted by the employer where the individual authorized to process the application is different from the individual authorized to act on behalf of the applicant, unless previously submitted to the Employment Office
  • If all the requirements are fulfilled, an agreement may be entered into.
  • Applications shall be submitted via
    • the web application;
    • a data box;
    • an email with an advanced electronic signature
3. Entering into an agreement
  • The agreement is generated automatically after the application is filled in and is submitted to the Employment Office together with the application. An agreement delivered in this manner is deemed to have been signed by the applicant.
  • If the Employment Office finds any error after the application was delivered, the applicant will be informed accordingly.
  • The agreement shall be deemed entered into if signed by the Employment Office and sent back to the applicant via a data box or by an email with an advanced electronic signature
4. Wage compensation statement
  • After the wage closing date, the employer shall submit to the Employment Office (via the web application) a statement of the wage compensation paid, including statutory levies, which shall include a list of employees and their birth numbers or the registration numbers of insured individuals (unless a birth number is specified) for whom a contribution is being claimed
  • The statement shall be submitted no later than by the end of the calendar month following the end of the reported monthly period, e.g. for the month of March it shall be submitted by the end of April!
  • Only the gross wage expense for the amount paid in compensation shall be shown in the statement of costs. If, for example, an employee worked part of the month and then obstacles arose, the statement shall only show the part paid for the duration of the obstacles, i.e. the time not worked
  • The relevant forms for both Scheme A and Scheme B may be found on the website of the Ministry of Labour and Social Affairs HERE (in Czech)
5. Provision of contribution
  • The contribution shall only be granted for the staff proved to be employed by the applicant, as evidenced by an inspection
  • The Employment Office shall pay the contribution into the employer’s account


Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
Employers whose economic activity is at risk due to the spread of the infection will receive a contribution to the full or partial reimbursement of wages that employees are entitled to due to an obstacle on the part of the employee (ordered quarantine) or the employer (business closed due to a government regulation), if it is proven that the obstacle was caused by COVID-19.

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
  • The employer complies with the provisions of the Labour Code
  • The employee for whom compensation is claimed must not be in their termination notice period and must not be given a termination notice
  • The employer is active in the business sphere
  • Employees must be employed and participate in the sickness and pension insurance system, meaning that the provision does not apply to agreements on work amounting to less than CZK 10,000
  • The employer must prove that they have paid the wages, including all deductions and income tax

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
  • The contribution will be paid by the Labour Office of the Czech Republic
  • Applications can be submitted beginning April 6, 2020
  • The period for which the subsidies will be paid out is from March 12 to August 31, 2020
  • For a period and in an amount depending on the reason for the obstacle to work
  • The obstacle to work will have to be identified for each employee individually

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
There are two schemes: A and B. Scheme A  
  • in the event of quarantine, employees receive compensation of 60% of their average reduced earnings
  • if a business is closed by a government regulation, employees receive compensation of 100% of their wage
Amount of contribution under scheme A  
  • The amount of the contribution is 80% of the wage compensation, including statutory levies, paid by the employer to the employee for the duration of the obstacles to work.
  • The employer shall therefore provide in the statement the amount of wage compensation paid and the part of the statutory levies that corresponds to the amount of the compensation paid. The contribution of the Employment Office then equals 80% of the sum of these amounts.
  • The maximum monthly amount of the contribution per employee is CZK 39,000.
Scheme B  
  • Obstacles to work on the employer’s side as a result of an ordered quarantine or child care for a significant proportion of employees (30% and more) – employees receive compensation of 100% of their average earnings
  • Limited availability of inputs (raw materials, products, services) required for the business activity – employees receive compensation of 80% of their average earnings
  • Reduced demand for the company’s services or products – employees receive compensation of 60% of their average earnings
Amount of contribution under scheme B  
  • The amount of the contribution is 60% of the wage compensation, including statutory levies, paid by the employer to the employee for the duration of the obstacles to work.
  • The employer shall therefore provide in the statement the amount of wage compensation paid and the part of the statutory levies that corresponds to the amount of the compensation paid. The contribution by the Employment Office then equals 60% of the sum of these amounts.
  • The maximum monthly amount of the contribution per employee is CZK 29,000.

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
The support will be provided after the end of the reporting period. For example, this means that for March, compensation will be available after all wages for March are processed and paid, including deductions.

Detailed information about drawdown options will be published by the government this week.

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
The exact conditions and procedure will be published on the website of the Ministry of Labour and Social Affairs this week www.mpsv.cz/antivirus.

The applications for all the contributions listed above will be fully electronic.

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
Another possibility is that the nature of the employee’s work enables them to work from home. The rules for home office are as follows:

  • The employer should sign an amendment to the employee’s employment contract to enable them to work from home
  • The employee is entitled to his or her full wage or salary
  • According to Section 151 of the Labour Code, the employer is to provide the employee with compensation for expenses demonstrably incurred in connection with the performance of their work. This includes e.g. increased energy consumption because they are using their laptop, printer and heating
The reimbursement of these costs is exempt from tax, but it is necessary to calculate the actual consumption of the increased costs. These costs are tax-deductible for employers.

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
Ended on 30. 6. 2020

The care benefit is one of the six benefits of the Czech health insurance system. Any employee who can’t work because they are taking care of a sick household member is entitled to this benefit. The person being cared for does not have to be a child or even a direct relative. They must, however, demonstrably live in the same household. There are currently discussions about extending the care benefit to parents (or persons with custody of children) while school facilities are closed.

  • The government has already approved an extension of the age limit, meaning that while exceptional measures are active, the benefit is also available to the parents of children under the age of 13
  • The care benefit for employees will also be paid after the statutory period of nine days, i.e. for the entire period in which schools and other facilities for children are closed
  • The care benefit will also be paid if the school facility is closed by its founder
  • The care benefit will also be paid if a facility caring for people with disabilities closes; there is no age limit on this provision, but the disabled person being cared for must live in the same household
  • In the case of sole traders (OSVČ), the loss of income caused by childcare will be compensated for by a special programme of the Ministry of Industry and Trade
  • This programme also extends the payment of the care benefit to care for people with disabilities in the same household without any age limit if a specialised care facility closes
  • These changes must still be passed by the Parliament, which has declared a state of legislative emergency. Once approved, the benefit will also be paid retroactively

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
This refers to cases when “an employer cannot assign work to an employee in the scope of their weekly hour allocation due to temporarily limited sales of products or services” (Section 209 (1) of the Labour Code).

  • Employers who do not have a trade union must have an internal regulation determining the amount of wage compensation for partial unemployment. This ranges between 60–100% of average earnings.
  • If the employer does not have a trade union, the employer is obliged to reduce wage compensation to up to 60% of average earnings by an internal regulation.
  • If the employer does have a trade union, the wage compensation may not be reduced by an internal regulation, but only by agreement between the employer and the trade union. Here, again, the minimum limit for wage compensation is 60% of average earnings.
  • The compensation of 60–100% is paid for the part of working hours in which the employee is not performing any work-related activities. For example, let’s assume that an employee normally works for 40 hours a week. The employer has given them work for 30 hours a week. For this work, they are entitled to their full wages. The remaining period, i.e. 10 hours a week, is compensated in an amount determined by the employer in an internal regulation.
  • For employees working in shifts, it is important to note that the employer is still obliged to inform their employees about the shift plan at least 14 days in advance, unless agreed otherwise.
 
Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
Comprehensive information on subsidies is available in the payroll manual for employers on the website of the Czech Ministry of Labour and Social Affairs HERE

Please contact:
Jiřina Kovaříková, Head of Payroll
jirina.kovarikova@rsm.cz
+420 731 193 980
The VAT payment deadline has not changed and the government has not adopted any measures to relieve VAT payments or postpone the payment deadline.

The only possibility is to request a payment deferment or payment in instalments. The taxpayer must prove in the request that the delay in the tax payment is caused by the extraordinary situation. If the application is submitted by 31 December 2020, the administrative fee for the tax deferment application will be waived.

We will be happy to assist you in preparing these applications.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
The deadlines for submitting VAT returns, VAT control statements and the payment of VAT have not changed, and the government has not adopted any measures to relieve VAT payment or postpone the payment deadline.

Late interest for late payment of VAT, interest on deferred VAT

Taxable entities must request relief of the latest interest on late VAT payment, as this will not apply automatically. Taxable entities must provide the reason for the delay in the application. Reasons that are fully accepted include the demonstration of the effects of the extraordinary situation. If the application is submitted by 31 December 2020, the administrative fee for filing the application for relief of late interest will be waived.

If the taxable entity lacks adequate funds to pay the tax, it may apply for a deferment of the tax payment or for payment in instalments. The taxpayer must prove in the request that the delay in the tax payment is caused by the extraordinary situation. If the application is submitted by 31 December 2020, the administrative fee for the tax deferment application will be waived.

Taxable entities that are allowed, on the basis of an individual request, to defer the payment of tax or to pay it in instalments for reasons related to the spread of coronavirus will be forgiven interest on late payment and interest on deferred amounts of the tax or payments made in instalments if the tax arose from 12/3/2020 to 31/12/2020.

Penalty for late submission of the VAT control statement

The penalty for failure to submit the VAT control statement in the amount of CZK 1,000 is automatically waived if the penalty due date is between 1 March 2020 and 31 December 2020. This penalty is due if a VAT control statement is filed late without the taxable entity being directly requested to remedy the failure.

Other penalties for the failure to submit a VAT control statement in an amount between CZK 10,000 and CZK 50,000 are only waived at the taxable entity’s request. The administrative fee for submitting an application will be waived on the condition that the issuance of a call to submit an inspection report or a request to change, supplement or confirm the data specified in the submitted inspection report and the subsequent submission of the related inspection report took place between 1/3/2020 and 31/7/2020 and the application to waive the fine is submitted in the period from 1/8/2020 to 31/12/2020.

We will be happy to assist you in preparing these applications.

Penalty for late submission of VAT returns

Please note that it is not possible to file individual requests for the waiver of penalties for the late submission of VAT returns. However, in certain situations, this penalty is waived automatically.

If at least part of the late interest is waived on the basis of an application for reasons related to the coronavirus epidemic, the penalty for late submission of the VAT return assessed for the relevant tax period is automatically waived.

If, based on an application, the taxable entity is permitted to defer the tax payment or pay in instalments for reasons related to the coronavirus epidemic, the penalty for late submission of the VAT return assessed for the relevant tax period is automatically waived.

If at least part of the penalty for the failure to submit a VAT control statement in an amount between CZK 10,000 and CZK 50,000 is waived on the basis of an application for reasons related to the coronavirus epidemic, the penalty for the late submission of a VAT return will also be waived for the taxable entity. This VAT return must be wholly or partly identical to the period for which the VAT control statement on which the penalty for late submission was waived should be submitted. All of this is only applicable if the late VAT return is filed no later than on the day on which the related delayed VAT control statement is filed.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
Pre-payments due on 15 June 2020 are automatically waived for all taxpayers whose fiscal year corresponds to the calendar year.

Those whose fiscal year is different or who wish to apply for a reduction of other income tax pre-payments need to use other instruments available according to the tax code, i.e. request changes to their pre-payment assessment or apply for an exception from the duty to prepay taxes (request for the waiver of pre-payments).

If you need our assistance, do not hesitate to contact us. We will be happy to help you with your request.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
Those taxpayers for whom the deadline for filing their 2019 tax return on 1 April 2020 has already passed or those who have their deadline for filing a standard tax return on 1 July 2020 can file their income tax return for 2019 without penalty and pay their tax until 18 August 2020.

However, this option does not apply to taxpayers who file tax returns with the Specialised Tax Office!

We should point out that this is not a postponement of the deadline for filing a standard tax return, but a general waiver of fines for late filing of personal and corporate income tax returns and interest on the late payment of tax. If possible, we recommend that all taxpayers file their return and pay their tax by the established deadline.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
At present, a tax package is working its way through the Chamber of Deputies, and, among other things, the legislation includes an amendment to the Income Tax Act introducing the retroactive application of a tax loss. It will be possible to apply the tax loss retrospectively by filing supplemental tax returns. The payer will thus be able to claim an income tax overpayment and request a refund. In this case, therefore, it will be possible to deduct the tax loss assessed in 2020 from the tax assessment base reported in 2019 and 2018. In addition, according to the transitional provision, it will be possible to claim the estimated loss for 2020 in a supplementary tax return for 2019 after filing the 2019 tax return.

If you have any questions concerning the possibility of applying the tax loss and making use of other government measures, we will be happy to answer them and assist you in the preparation of applications. We will then be pleased to help you complete your tax returns.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
Yes, the original postponement of the deadline for filing tax returns was followed by the general cancellation of the real estate acquisition tax. This cancellation is effective for transactions entered in the property register from December 2019. This is regulated by Act 386/2020 Coll.

Please contact:
Kateřina Provodová, Head of Tax
katerina.provodova@rsm.cz
+420 603 418 977
These are primarily measures relating to bank guarantees, deferred payment of income tax advances, and the offsetting of losses not yet claimed. This measure applies to all private businesses, regardless of the number of employees or the amount of income, i.e. small companies, self-employed persons as well as large enterprises.

Regarding deferred payment of income tax advances, this proposal applies to all taxpayers whose year-on-year sales drop by more than 40% in the relevant month. This measure shall apply as of 04/2020. This comparison is made by the taxpayer, electronically in the form of an affidavit in which the taxpayer notifies to the financial administration that the income tax advances will not be paid in the given quarter. The affidavit is to be filed every month or quarter for the duration of the extraordinary situation in which the taxpayer wishes the payment to be deferred. Unpaid advances will be settled in the tax return for 2020, i.e. by March 2021.

The second measure is the possibility of offsetting losses not yet claimed since 2014. This measure applies to private businesses that file a tax return for 2019 in the period between 1 January 2020 and 31 December 2020. This means that even a taxpayer who filed the tax return in January/February 2020 due to their fiscal year can also claim the tax loss by means of a supplemental tax return. The statutory regime for claiming a loss from the past remains in force, and only that part of the loss that could not be legally claimed with respect to the amount of the tax base in previous years remains as a one-off amortisation option today.

As part of the first aid to private businesses, the Ministry of Finance of the Slovak Republic in cooperation with Slovak Investment Holding (SIH) has prepared a system of bank guarantees and interest subsidies under the title of SIH Anti-Corona Guarantee. SIH earmarked 38 million euros from EU money, which will serve as a guarantee for loans provided to clients by contracted commercial banks. Aid in the form of loans to sustain operations in the unfavourable period is intended for self-employed individuals and small and medium-sized enterprises. This will allow bank clients to benefit from subsidised loans of up to 1.2 million euros. Overall, banks will provide loans of more than 80 million euros under this scheme. This should be a maximum of 4 annual loans, including a 12-month deferral of both principal and interest (re)payments. The interest rate subsidy will be up to 4%, which means that the interest will be borne by SIH and the client can obtain a low-interest or interest-free loan if the client maintains employment. Supported businesses will be able to use the loan resources for their investment and operating costs in order to maintain employment. We expect that banks will show interest in cooperation and that the criteria fulfilment will be demonstrated during April; subsequently, banks can start providing the SIH anti-corona loans to their clients.

Please contact:
Michal Šubín, Head of Family Office
michal.subin@rsm.cz
+420 731 192 464 / +421 905 134 935
Based on the latest approved measures, the Slovak Government has extended the category of the recipients eligible to assistance as regards the protection of jobs. As regards employers who are not self-employed entrepreneurs, the allowance limit of EUR 800,000 is cancelled. Thanks to this, the assistance is now also available to large corporations. The concept of the so-called Kurzarbeit is introduced, to assist each employee affected by obstacles at work.

The application must be submitted by the end of the calendar month following the month for which the employer is requesting the allowance. The deadline for the applications for March is on 15 May 2020.

The following measures have been adopted:

  • Employers (including employers who are self-employed entrepreneurs) who were forced to close down their outlets based on the decision of the Public Health Office can now apply for an allowance for the compensation for their employees’ salaries, corresponding to 80% of the average earnings, up to a maximum of EUR 1,100.
  • Self-employed entrepreneurs who were forced to close down their outlets based on the decision of the Public Health Office or whose sales decreased by at least 20% (or 10% in March). The amount of the allowance is based on the decrease in sales, as follows:
  • Employers (including employers who are self-employed entrepreneurs) who keep jobs even despite the interruption or restriction of their activities during a declared emergency situation, can make use of the so-called “Kurzarbeit” – an allowance to compensate for the salaries for employees to whom employers are unable to assign work owing to an obstacle affecting the employer (Section 142 (4) of the Labour Code), up to 80% of the employee’s average earnings, with the maximum limit of EUR 880.
  • Self-employed entrepreneurs and single-partner limited liability companies who have no other income during the period started on 13 March 2020. The flat-rate allowance to compensate for the loss of income from gainful employment will be EUR 105 for March and EUR 210 for April and May 2020.

Please contact:
Michal Šubín, Head of Family Office
michal.subin@rsm.cz
+420 731 192 464 / +421 905 134 935
RSM CZ has a team of professionals who can take care of your IT, both remotely and in the form of regular visits.

Please contact:
Karel Fišnar, Head of Cloud Solution & Services
karel.fisnar@rsm.cz
+420 602 614 817
A team of IT specialists from RSM CZ will conduct an initial security analysis and is here to take care of all vulnerability risks and the availability of your infrastructure on a continual basis.

Please contact:
Karel Fišnar, Head of Cloud Solution & Services
karel.fisnar@rsm.cz
+420 602 614 817
We are able to move your applications to a data centre run by RSM CZ in a very short time and run them in a full 24x7 mode.

Please contact:
Karel Fišnar, Head of Cloud Solution & Services
karel.fisnar@rsm.cz
+420 602 614 817
Our team of process specialists offers you a helping hand and guidance aimed at increasing the efficiency of your company management and accelerating and streamlining your processes.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
The financial function is growing within organizations to become a strategic enabler. We help you modernize your financial functions by optimizing strategy and operating models, improving business processes and leveraging digital finance solutions.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
Monitoring all existing processes, deep understanding of the company’s inner workings and identifying areas with potential for improvement. We provide the process design and improvement strategy planning that aims to build your processes in the most efficient way for your organization. “If you can’t measure it, you can’t manage it”; therefore, we can also offer the implementation of lean six sigma process methodologies.

Lean is about smooth process flow, focusing only on those activities that add value for the customer and eliminating all other activities that don’t. It’s about removing waste and increasing customer value.

Lean is based on the ability to achieve more with fewer resources by continuously eliminating waste. Products and Services are driven in the right amount, to the right location, at the right time and in the right condition.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
Business leaders face challenges in terms of how to attract, engage, manage and retain talents every day. RSM's people and organization consultants can help you address your people challenges with custom solutions for your organization.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
Digital is evolving quickly, and the right solutions can significantly enhance your efficiency and productivity. Our team helps your organization understand your technology and digital needs and works with you to design a strategy that aligns with your goals.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
Continuous Improvement will move an organization further along the path of becoming a digital business, where IT systems and the embedded processes they support become virtually self-managing, steering them toward truly intelligent IT.

Please contact:
Mária Straňáková, Implementation Manager
maria.stranakova@rsm.cz
+420 702 233 104
The current economic developments contrast sharply with the expectations presented in early 2020. It is evident that even with the high level of existing knowledge, there are events which recur in the economy and lead to more or less significant negative economic fluctuations.

In the Czech economy, a number of small businesses have grown into successful enterprises. Often, they grew organically, with the scope of their activities gradually expanding and more production capacity being added. In many cases, this development took place within a single company.

The negative economic situation is an opportunity to consider steps towards the long-term diversification of business risks. One step is to split companies into several business units, where the key tangible assets are concentrated in one of the entities and leased out to others under standard market conditions. This can be done using the process of legal transformations, such as split-ups.

RSM CZ has long-term experience with restructuring processes, including related activities (valuation, financial statements, related tax guidance, etc.).

If you are considering changes to your company/holding structure, we are here to discuss your plans with you.

Please contact:
Rudolf Hájek, Senior Manager
rudolf.hajek@rsm.cz
+420 739 609 022
Currently, all businesses are working hard to stay resilient through tough economic times. As lockdown measures are gradually easing, questions may arise as to whether a particular company has suffered damage for which it should be compensated. At the same time, the question of damage cannot be narrowed down just to damage caused by restrictions imposed by the state; it is necessary to take into account the aspect of contractual relationships and other justified expectations.

If you are considering bringing your claims to an independent court, a legal analysis by a legal specialist is something to start with. In the next step, it is worth considering the calculation of the damage by an independent expert. This can take various forms – including an indicative valuation (which usually serves to define the basic scope of the possible damage) or an independent expert’s opinion, which can be presented to the court as independent evidence according to the rules of the current legislation. The advantage of an expert opinion is also that it is a detailed economic analysis that the judge can become acquainted with in detail.

The expert institute RSM CZ has extensive experience with the processing of expert opinions for the purpose of court litigation, acting either at the request of a party involved in a court dispute or on the basis of appointment by a court.

We will be happy to discuss various options for our future cooperation with you.

Please contact:
Rudolf Hájek, Senior Manager
rudolf.hajek@rsm.cz
+420 739 609 022
As regards commercial real estate, the attitude of individual investors will be of importance. The commercial market, dominated by foreign investors, may be influenced by an outflow of these investors in the event of difficulties in their home countries. The impact of the coronavirus pandemic on commercial real estate is highly individual and is mainly related to the structure of the current tenant in terms of income stability, operational resilience, and occupancy rate. In these terms, a portfolio consisting of international corporations appears to be ideal. The biggest risks are faced by owners who offer short-term leases or those negotiating the conclusion or renewal of lease agreements. It will therefore be important in the long run for companies and real estate owners to be prepared and able to respond effectively in the event of the occurrence of a similar situation. A number of tenants will wish to cover these circumstances in their future lease agreements.

In our newsletter you will found our summary of the potential impacts of the coronavirus pandemic on the individual commercial real estate segments. We have focused on one of the likely scenarios of the development of the rates of return on premium real estate in a premium location with the best tenant structure (Prime Yields), which are crucial in terms of the valuation of real estate and which should reflect the impacts of this new pandemic crisis.

The full newsletter on the Impacts of Coronavirus on Commercial Real Estate can be found HERE. In this article, we focus on individual segments of commercial real estate - office, industrial and logistics spaces, retail, and hotels.

What can we do for you?

Whatever your need for valuation in this situation, we will be happy to discuss the issue with you. The RSM CZ expert institute provides a wide range of real estate valuation services.

Please contact:
Jiří Skotnica, Senior Manager
jiri.skotnica@rsm.cz
+420 739 680 970
This newsletter loosely follows our previously published comment concerning the development of real estate prices in the context of the economic downturn, with a specific focus on the impact on what are called Prime Yields.

In this article, we complete our view with the possible development of the cost of the financing of real estate properties and a wide group of industrial enterprises.

Development of the Cost of Financing Real Estate Projects

As we mentioned in our previous newsletter, there are currently no real estate transactions from which it would be possible to estimate the current level of Prime Yields. The situation is also similar as regards the cost of financing real estate properties using senior loan resources. In this case, however, we can use the bond markets, which publish information on the required yield of bonds, as a source of information. In our analysis, we used the Real Estate data published in the Capital IQ database, based on values as of 3 February 2020 and 15 April 2020. We used bonds in the AA- to A- investment category denominated in USD or EUR and, as a second group, bonds in the BBB + to BB- category (this category will include most transactions in the Czech Republic).

In our analysis, we use IRS 5Y as the basic interest rate – i.e. a five-year fixation of the rates like PRIBOR or EURIBOR. Where these rates are negative, we use the rate of 0% p.a.

As of 3 February 2020, the risk spreads in bonds in the AA- to A- category had a median level of 36 bps – i.e. the bonds offered a yield close to the relevant IRS rates. However, as of 15 April 2020, the median of the risk spreads was at 214 bps. The required performance in such highly creditworthy bonds thus grew by approximately 180 bps. In the case of the very frequent financing in EUR, this development directly corresponds to the increase in the cost of financing from senior sources, while in the case of the less frequent financing in CZK, we can see the positive effects of the central bank’s policies[1], which resulted in the reduction of IRS rates. Five-year funding would thus be more expensive by only 70 bps (however, this would still be more expensive in absolute figures compared to financing in EUR).

In the case of the less creditworthy but still reasonably high-quality bond group with a BBB+ to BB- rating, the development between the two dates is only slightly more dynamic, with the risk spreads at the median level growing from 77 bps to 283 bps – i.e. by approx. 200 bps. This development would also correspond to the increase in the cost of financing in EUR; as regards financing in CZK, the cost of external loan resources grew by only 100 bps (financing in CZK would continue to be more expensive than financing in EUR).

In recent history, senior loan resources have been the most significant resource of real estate financing, with their share in the value of the real estate normally exceeding 60% of the real estate’s market value. Although bonds are generally considered an instrument bearing a higher risk, the increase in risk spreads even in the high creditworthiness category clearly indicates an increase in Prime Yields and an increase in investors’ demands for capital investments in real estate.

Development of the Cost of Financing Industrial Enterprises

At the same time, we examined the development of bond yields in the category of broadly defined industrial enterprises.

Here we first worked with the category of highly creditworthy businesses, with their rating in the AA- to A- category. The median risk spread of these bonds grew from 26 bps to 93 bps – i.e. by approximately 70 bps. As a consequence of the CNB’s policy affecting financing in CZK, the cost of financing in this category decreased slightly, by 40 bps.

The development of yields from bonds in a purely speculative group of businesses with the rating grade of BB+ to B- is significantly more dynamic. Enterprises with such a credit quality represent a large group in the context of the Czech Republic. The median risk spread grew from 259 bps to 768 bps – i.e. by approximately 510 bps. The cost of financing in CZK would then grow from 4.41% to 8.43% – i.e. despite the decline in key interest rates, the cost of external resources would almost double.

It is again true that the bonds may be affected by lower liquidity and a worse security level compared to senior bank resources.

The above development shows how significant the government’s policy aimed at guaranteeing a part of the loan resources within what are called the COVID programmes can be. For a considerable number of businesses with limited financial strength, such an increase in the cost of financing in a situation of falling demand for their products may represent an acceptable option. If you are considering the use of financing with state programme backing, we will be happy to offer our guidance.
[1] The 2T repo rate dropped from 2.25% p.a. as of 7 February 2020 to 1.00% p.a. on 27 March 2020

Please contact:
Rudolf Hájek, Senior Manager
rudolf.hajek@rsm.cz
+420 739 609 022

YOU HAVEN’T FOUND AN ANSWER TO YOUR QUESTION?

Hello, I am Martina, the chief COVID 19 crisis coordinator at RSM CZ & SK. If you need any help, I am available by phone every weekday between 9AM and 5PM. You can also e-mail me. Thank you.
Let’s work together to solve your problem!

Martina Voborníková
RSM CZ COVID Coordinator
+420 739 343 392
Martina.Vobornikova@rsm.cz
spolutozvaldneme@rsm.cz

COVID-19 pandemics and cyclical sectors – recovery, or an altered economic position?

29.9.2020
For significant events such as the COVID-19 pandemic, we can be tempted to believe that their effects are uniform across sectors. Leaning on the international Capital IQ database operated by Standard & Poors, this article shows that even in cyclical sectors, investors perceive the impact differently. Solid data is of paramount importance for economic decisions […]

Antivirus Programme Extended

31.8.2020
We would like to inform you that on 24 August 2020, the government approved the extension of the Antivirus programme modes A and B until 31 October 2020. Antivirus, a targeted programme to support employment, has been in force since March 2020. Mode A Compensates employers who had to put their workers in quarantine or […]

COVID – Rent Programme

3.7.2020
The special subsidy COVID – Rent programme was drawn up by the Czech Ministry of Industry and Trade in response to the global coronavirus pandemic. It is intended for entrepreneurs who, due to the emergency measures, had to temporarily close their establishments used for retail activities and provision of customer services in such establishments. The […]

First Tax Legislation Amendments Related to Coronavirus Epidemic Waiting for President’s Signature

22.6.2020
In addition to what are called the liberation packages, the last of which again postpones the deadline by which individual and corporate tax payers need to file their 2019 tax returns without any sanctions until 18 August 2020, and the validity of which only required publication in the financial newsletter, there are also some changes […]

Complete overview of funding programmes – updated

16.6.2020
Do you know what the real options for receiving funding from programmes related to the measures taken against COVID-19 are?  We have prepared for you an updated overview of which funding programmes are available for entrepreneurs and what their current status is: COVID II programme The first round of applications for the COVID II Guarantee […]

State to Waive Social Security Payments by Businesses of up to 50 Employees

4.6.2020
We would like to let you know about another quick change presented by the Czech Government as part of its campaign to help small businesses. The state will waive social security payments for June, July and August 2020 by small companies of up to 50 employees. Conditions for Waiver of Payments The employers who intend […]

Economy in hibernation and cost of financing

27.4.2020
This newsletter loosely follows our previously published comment concerning the development of real estate prices in the context of the economic downturn, with a specific focus on the impact on what are called Prime Yields. In this article, we complete our view with the possible development of the cost of the financing of real estate […]

Coronavirus and Real Estate

22.4.2020
What impact can the coronavirus have on the valuation of commercial real estate? Having hit almost all areas of the Czech economy, the COVID-19 pandemic is, without doubt, one of the main and hottest topics. Having paralysed business activity, put the lid on a number of manufacturing plants, stopped tourism, and shut down restaurants and […]

How can you apply for Antivirus subsidies?

15.4.2020
In today’s issue of our newsletter you will find information on how to draw subsidies from the Antivirus programme, which was launched in the first week of April with the aim of protecting jobs.  Employers may apply at the Employment Office for a contribution to the wage compensation paid to employees from 12 March to […]

Possible employment modes caused by quarantine or emergency measures related to the spread of COVID-19

30.3.2020
You are currently asking us a lot of questions about the numerous variants of employee absence as a result of quarantine or emergency measures related to the spread of COVID-19. For this reason, we have prepared for you the following summary, which we will keep updating as the situation evolves: Employment support programme The government […]