Compensation bonus for members of limited liability companies with no employees or only family members

The government has passed an amendment to the Act on Compensation Bonuses, allowing them to be also paid to members of limited liability companies (‘s.r.o.s’) that have no employees and no more than two members, or members who belong to a single family.

This support is aimed at limited liability companies that have scaled or shut down, with significant effect on their gainful activity (i.e. in the relevant period, the company was unable to carry out its usual gainful activity, fully or in part, as a result of emergency measures, e.g. due to closure of premises, restriction of operation, quarantine of members, etc.).  So far, members of limited liability companies with no employees, along with family businesses that are limited liability companies, were not entitled to the compensation bonus, as it was intended solely for the self-employed/unincorporated entrepreneurs.

The compensation bonus will now be available to all individuals who as at 12 March 2020 were members of a limited liability company founded for the purpose of generating profit with either:

  • no more than two members who are natural persons and whose share is not represented by a share certificate, or
  • only members who simultaneously are also members of one family (direct relatives (ancestors and descendants), siblings, spouses or registered partners under the law regulating registered partnership), and whose share is not represented by a share certificate.

The member must not carry out activity for which they would be covered by employee sickness insurance, except for employment in the limited liability company in which they are a member; at the same time, as at 12 March 2020, they must be viewed as a Czech tax resident or a resident of another EU/EEC member state, as long as their aggregate income from sources in the Czech Republic for the 2020 calendar year accounts for at least 90% of their total income.

In the relevant period (i.e. from 12 March to 8 June 2020, or 31 August 2020 if the bonus period is extended), the company must not be in bankruptcy or liquidation, and must not be registered as an unreliable VAT payer. The company’s turnover (under the Accounting Act) for the completed corporate income tax period immediately preceding the bonus period must exceed CZK 180,000, or the company must expect its turnover for the first and so far uncompleted corporate income tax period of its activity to exceed CZK 180,000. As at 12 March 2020, the company must have been a Czech tax resident or a resident of another EU/EEC member state, as long as most of its income for the period was generated from sources in the Czech Republic. 

If an individual is a member of several limited liability companies, compliance with the above conditions is required separately for each limited liability company.

The amount of the compensation bonus is CZK 500 per each day of the relevant period for which the member has not received any other form of support as a compensation for restriction of their activity due to COVID-19 or any related emergency measures. If an applicant is a member of several limited liability companies that meet the above conditions, they will only be entitled to one bonus per calendar day. Applications for compensation bonuses may be filed no later than 60 days after the end of the relevant period.

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