Measures taken by the Govt of the Czech Republic

Here are measures taken by the Govt of the Czech Republic to deal with the economic consequences of COVID-19. (as of 15 April 2020)

I) Financial aid and support (Government and state controlled financial institutions)

• On March 16, the Czech-Moravian Guarantee and Development Bank (CMZRB) has launched COVID credit applications. The target group are SMEs and self-employed, whose economic activities are limited due to the outbreak of the coronavirus infection and related preventive measures. It aims at facilitating access to operational financing for those businesses through interest-free loans. The loans range from 18 000 EUR to 540 000 EUR. Entrepreneurs will be eligible to use it for example to pay employees' salaries, energy costs, rents, to finance supplies, to pay supplier-customer invoices, to pre-finance receivables, etc.
• CMZRB also provides a guarantee for commercial loans for small and medium-sized enterprises (for companies, not self-employed).
• There is an enormous demand (after approx. 3200 applications the original amount has been depleted, given that all of them will be approved, which we will see after those will be processed. First support already provided to the companies. No further applications are being accepted now.)
• In order to raise the capital, at least 360 millions of EUR (approx.) will be transferred from the „Operational Program Enterprise and Innovation for Competitiveness“. Details and parameters are being prepared.

COVID II – new program which is not providing loans but preferential supported guarantees for commercial loans.

The Czech-Moravian Guarantee and Development Bank (CMZRB), together with the Ministry of Industry and Trade started the COVID II program on April 2. CMZRB provides entrepreneurs with guarantees for commercial bank loans and contribute to the payment of interest – up to approx, 36 000 EUR. The guaranteed operating credit of the COVID II program should support around 7000 business projects worth approximately 715 millions EUR. The program is financed from the Operational Program “Enterprise and Innovation for competitiveness” under the Ministry of Industry and Commerce. Commercial banks are prepared for the COVID II program.

• This is a “de minimis” support, which will be provided in the so-called round calls. A total of approx. 53,5 millions EUR will be available in each round, once the capacity is full, the round will be closed for applications and the next round will be announced 10 working days after the end of the previous round. The first started starts on Thursday, April 2.
• The guarantee can be up to 80% of the principal of a commercial loan, with guarantee period up to 3 years. Guaranteed loan up to approx. 535 thousands EUR. Financial contribution for interest payments up to approx. 36 000 EUR.
• The program can finance, through commercial loans, the cost of wages, energy, rent, payment of supplier-customer invoices, pre-financing of receivables, acquisition of material or inventory.
• Total allocation for the program is approx. 180 millions EUR.

COVID III – in preparation, 360 millions EUR allocations, guarantees of commercial credits

Support via guarantees for commercial credits (or credit restructuring) for the large companies

• A relatively robust program of bank loans guarantees is being prepared to support large companies (SMEs are being supported by CMZRB through loans and loan guarantees – see above). Its parameters are intensively discussed with EGAP -Export Guarantee and Insurance Corporation and Ministry of Finance and Ministry of Industry and TRade. In many cases, we've already contributed to better setup and availability of this support - some parameters have been changed according our suggestions. Now we focus mainly on achieving a higher maximum guaranteed loan limit (now CZK 1.4bn, CZK 3-5bn required). Once approved, the EGAP should provide guarantees for operating (up to 3 years) and investment (up to 5 years) loans to companies over 250 employees. Up to a quarter of the company's turnover, with a range of CZK 5m to CZK 1.4bn (we want to increase this). A maximum of 80% of the loan may be guaranteed. For the purposes of this support, an exporter is considered to be a company with 20% of its turnover generated by exports, but subcontracting for the company carrying out the final export is also included. The maximum free available “insurance capacity” of EGAP is now around 7 billion EUR.

-------------------------------------------------------------------------------------------------------------------------

• State Export Guarantee and Insurance Corporation (EGAP) reacts as well and provides a special package to ease the situation for exporters. The measures include:

• Introduction of the Fast Track, i.e. priority processing of insurance applications for exporters looking for new customers due to the global coronavirus pandemic.
• Significantly reduced fees for exporters seeking EGAP insurance products covering new risks.
• Shortening the period of time required to recognize claims (waiting time) for insured credits from 6 to 3 months and for insured guarantees from 3 months to 1 month in order to help resolve any cash flow problems of exporters.

• Czech Export Bank (CEB) even during the viral pandemic provides its clients with full services and, in cooperation with the EGAP export insurance company, now offers financial products and services under favorable conditions. CEB is ready to help all exporters, regardless of the company size, by providing products that will support exports of Czech goods abroad.
• The Ministry of Foreign Affairs of the Czech Republic announced the Emergency Package for Czech exporters. Embassies of the Czech Republic and the Ministry of Foreign Affairs offer assistance to Czech entrepreneurs in case of problems with the realization of commercial supplies abroad, especially in case of administrative barriers imposed on importers by local authorities. With respect to restrictions of the movement of persons, the Ministry offers assistance in finding new contacts and opportunities in areas that will be a part of national stimulus packages. These services are for free.

Emergency package contains mainly:

1) Practical information on conducting foreign operations in the coronavirus situation
with a number of restrictions in the target country;
2) Assistance of embassies in solving problems with performing of trade cases;
3) Finding and analyzing opportunities, assisting in identifying and verifying suitable
partners.
4) Assistance and information sharing through a series of webinars and online
consultations.
5) Offer to use services of local experts to assist the businesses on site during the

negotiating and implementing phase.

Synergy with commercial banks:

• According to the Czech Banking association, banks will be willing to postpone the repayment of consumer loans and mortgages for three months. In particular, they want to be helpful towards small businesses which have difficulty paying debts due to the coronavirus epidemic.

II) Tax measures of the Financial Administration of the Czech Republic

• Extension of the deadline for tax return of income taxes up to July 1 (it means 3 more months). All taxpayers will automatically be allowed to file their income tax return and pay this tax without any sanction no later than 3 months later, without having to prove the reasons related to coronavirus.
• Remission of the penalty for late tax claims in all cases where the tax entity individually applies for remission of interest for late payment or for postponing or tax installments and proves reasons in any way related to corona-virus. (E.g. illness or quarantine of accountants or other key employees whose absence prevented them from fulfilling their tax liability.)
• General waiver of fines for the late submission of a “VAT control report” of EUR 35 - incurred between 1 March and 31 July 2020.

o In addition the Directorate General for Finance will be instructed to individually waive fines for failure to submit this control report for the period from 1 March to 31 July, if caused by corona-virus.

• Flat waiver of the administrative fee for filing an application for delay or installments of the tax; remission of the interests on late payment etc.

IIa) So called “Liberation package”

• Electronic Sales Records system (EET) - the obligation to electronically record sales for entities in all phases of the EET will be suspended for an emergency period and for the next three months. (Many firms can´t solve technical problems now, renew certificates, obtain device maintenance or fulfill various deadlines if they are obliged to start the evidence this Spring)
• Remission of the June advance on personal and corporate income tax. The June advance (ie the second advance for quarterly payers and the first advance for half-yearly payers) will not be paid at all.
• General waiver of a fine for late filing of a real estate property tax return or for late payment of a real estate property tax or an advance payment of such a tax.
• Introduction of the “Loss carryback” institute for both the physical persons income tax and legal persons income tax for 2020. It will be redeemable in the tax return for 2019 and 2018.
• Flat value added tax payments exclusion on selected goods that are delivered free of charge (from 12 March 2020 until the end of the emergency), such as: test kits and diagnostic test tools for COVID-19, protective clothing and the alike, thermometers, disinfectants and sterilization products, other medical devices and medical consumables. The remission of VAT also applies to the supply of goods used free of charge for the production of such protective equipment.
• Postponement of Road Tax advances payment due in April and July

---------------------------------------------------------------------------------------------------------

+ one extra measure: six months' holiday in paying health and social insurance contributions for 514,000 self-employed persons who only have income from business. Self-employed sole traders and entrepreneurs will not have to pay monthly advances for insurance between March and August 2020. Subsequently, in the 2020 final bill, their levy will be reduced by 6 times the amount of the minimum advances. They will pay only the extras above the compulsory minimum and in a postponed time.

III) Labor market

• Targeted employment support program (kurzarbeit) “Antivirus”

The Government of the Czech Republic has approved (March 31) the introduction of the so-called “kurzarbeit” for companies that have been subject to restrictions due to the spread of coronavirus. The Confederation of Industry of the Czech Republic cooperates closely with the government. The goal is to reduce the impact of the COVID-19 pandemic on Czech labor market.

The period of validity of the Program is provisionally fixed until 30 June 2020, with a possibility of eventual extension. The program can be used to pay a contribution to reimburse employers' eligible costs incurred after March 1, 2020.

The aim of the program is to compensate for wage costs, or part thereof, in the form of wage or salary reimbursement payable to employees for periods of work-related obstacles caused by quarantine, emergency and crisis measures related to the spread of COVID-19 in the Czech Republic and abroad.

The Program is implemented by the Labor Office of the Czech Republic. The Ministry of Labor and Social Affairs will through the Labor Office of the Czech Republic ensure the payment of the following contributions to employers (upon request of the employer, the Labor Office will conclude an agreement on the payment of the contribution(s) with the employer): /it is not a special law, but the agreement between the Labor Office and the employer/

In the updated version as of April 1 there are two regimes (it is simplified, but from our point of view one important mode/regime is still missing):

A) Support for the company in order to compensate the wages of each employee who has been ordered to quarantine or who cannot work because company had to close or restrict operations in connection with the government crisis resolutions and emergency measures by public health authorities, including competent authorities abroad.

(80% of eligible expenses, but maximum approx. EUR 1 400,- per employee)

B) This regime contains all the other situations previously marked as B to E

The contribution belongs to a company that cannot allocate work to employees and it is anticipated that these barriers are related to the COVID-19 infection. Those are mainly obstacles to work caused by the absence of a significant proportion of employees at the workplace, as a result of obstacles to work on their part. Other reasons are also reduction in the sales of employers' production or a lack of inputs.

(60% of eligible expenses, but maximum approx. EUR 1040,- per employee)
---------------------------------------------------------------------------------------------------------

The business representation (SP CR) wants to add another regime – C - in order to help companies that can´t practically interrupt operations at all. It includes steel mills and coke production units, refineries, chemical plants, various glass works etc.

C) This regime is not in place, but we fight for. We want above mentioned uninterruptable manufacturing to be supported as follows: The state should pay 50% of the eligible expenses per employee, in case the demand declines 30% or more and the production declines 20% or more.

IV) Employment of foreigners

• During the state of emergency, foreigners legally residing in the Czech Republic are entitled to stay in the Czech Republic and do not have to deal with residence issues.
• Work permits and short-term Schengen visas are extended for a period of up to 60 days since the end of the state of emergency, but the employer must extend the employment contract.
• For employees with an employee card, the otherwise valid six-month limitation for employer change is not applicable.
• Employees with a blue or employee card in case of a transition to an employer carrying out emergency measures or assisting in the implementation of emergency measures in an emergency state shall notify this change no later than on the day of commencement - normally 30 days in advance.

V) Other measures

• There is a on-line project https://spojujemecesko.cz/ which associates and support the initiatives of volunteers, companies and the state. It is a state administration project with proud support and cooperation of the Confederation of Industry. As a part of this you can also visit https://covpoint.org/ where a company can offer support to the state or to other companies. There is a market place of services and goods too.
• The European Commission has authorized the Czech Republic for state aid for small and medium-sized enterprises that produce medical and protective equipment to combat coronavirus. The total amount can reach up to EUR 3,6 millions. COVID-19 Technology of the Czech Ministry of Industry and Trade focuses on investment support for SMEs in the production of medical and protective materials.

Some of the measures are still being refined or updated.
In Prague, April 15
Confederation of Industry of the Czech Republic, SPCR