Antivirus programme with a new coat
The government decided to extend current Regime B of the Antivirus programme and, simultaneously, the chamber of deputies approved long-awaited Regime C, involving the waiver of part of social security premiums and state employment policy contributions mandatorily paid by employers.
Extended Regime B and new Regime C
Under the Antivirus programme’s Regime A and B, employers have been receiving partial compensation for wage compensation paid to employees in connection with some impediments to work. Whereas Regime A applies to situations such as the forced closure or restriction of operations due to emergency or extraordinary measures and quarantine, Regime B deals with related economic problems employers have had to tackle, such as the absence of significant or key personnel, the unavailability of inputs, or the restriction of demand for services or products.
Support provided within these regimes should have ended at the end of May. However, on 25 May, the government extended the period of eligibility of expenses under Regime B until 31 August 2020. It seems that Regime A will be discontinued from the beginning of June. While closed or restricted operations due to emergency or extraordinary measures will be rather an exception owing to the loosening of business and other activities, employers in practice may still be hit by the end of state support for quarantined employees.
At the end of the last week, the chamber of deputies passed long-awaited Regime C of the Antivirus programme. According to the proposed regulation, part of social security premiums and state employment policy contributions mandatorily paid by employers (i.e. 24.8% of the aggregate income of their employees) should be waived for June to August 2020. In practice, the waiver should be performed as follows: with some exceptions stipulated by law, the employer’s assessment base for a calendar month to which the waiver applies should not include the assessment bases of employees under employment relationships effective on the last day of the calendar month, up to 1.5 multiple of the average wage of each employee.
Employers entitled to the waiver of premiums should be those who on the last day of the calendar month employ 50 or less employees that contribute to the sickness insurance scheme. Another precondition is that employees under employment relationship who contribute to the sickness insurance scheme on the last day of the calendar month account for at least 90% of the employees on the last day of March 2020 and the aggregate of assessment bases of these employees amounts to at least 90% of the aggregate of assessment bases of employees for March 2020.
Moreover, to become entitled to the waiver of premiums, employers must pay the premiums their employees are obliged to pay on time and may not simultaneously draw on any other funds from the Antivirus programme in a particular month.
The entitlement to the waiver of premiums does not apply to employers from the public sector, certain health service providers and employers who were not tax residents of the CR, EU or EEA on 1 June 2020.
The fulfilment of the conditions for the entitlement to waive premiums are assessed separately for each individual calendar month. According to the Ministry of Labour and Social Affairs, it is not necessary to apply for the waiver; employers only need to notify the Czech Social Security Administration of the reduction in the assessment base via their monthly statements, and pay the appropriately reduced premiums.
Determination of super-gross wage still uncertain
The question regarding tax implications associated with the waiver of part of employer-paid social security premiums and state employment policy contributions remains unanswered. At present, the tax base for the calculation of a prepayment of income tax on employment comprises gross income accounted by the employer for an employee for a particular calendar month plus related social security and health insurance premiums paid by the employer (i.e. super-gross wage). If part of the employer’s social security premiums and state employment policy contributions is waived, how will the super-gross wage of an employee for a particular month be determined?
Under the existing legal regulation, it can be deduced that if social security premiums and state employment policy contributions paid the employer amount to zero, the employee’s tax base will only equal the gross monthly income accounted by the employer for the employee. However, the same question, inquiring about the methodological interpretation of this change and its implications for the determination of the super-gross wage, has been raised with the Ministry of Finance.
According to its unofficial opinion, the waiver of part of the employer’s social security premiums and state employment policy contributions should not affect the determination of the super-gross wage and, consequently, prepayments of income tax on employment should not be reduced. Once the Ministry of Finance or the General Financial Directorate issue an official standpoint, we will let you know.
Whereas Regime B has already been extended, the final version of Regime C is yet uncertain, as the appropriate law is yet to be passed by the senate in a state of legislative emergency and signed by the president.