To mitigate the negative effects, the European Commission (EC) has adopted and published a Temporary Framework for State aid to enable EU Member States to further support and stabilize the economy during the COVID-19 outbreak. EU Member States now have the possibility to set out operational programs and provide up to five types of state aid. These are direct grants up to €800,000 per undertaking, selective tax advantages and advance payments; 6 year state 
guarantees for loans taken by companies from banks; 6 year subsidised public loans to companies; safeguards for banks that channel State aid to the real economy, and short-term export credit insurance. The EC is already preparing an extension to cover Research & Development, medical equipment and wage subsidies for employees. 

II. Regulatory measures taken by EU member states 
EU Member States are therefore now able to prepare these support programs, which shall meet the conditions and criteria set out by the EU Temporary Framework. Once notified to and approved by the European Commission, the EU Member States will start providing aid and support to business corporations affected by the spread of the novel coronavirus and subsequent governmental measures. So far, 10 EU Member States have notified their intended measures under this State aid procedure scheme. The Czech Republic has not yet filed any State aid notification to the EC to trigger the approval procedure under the above-mentioned Temporary Framework scheme. Support under the Temporary Framework will be available until the end of 2020. 

EU Member States might, however, also use other financial measures to revitalize their economy, for example, by providing tax relief, supporting employers, or providing compensation for the damage caused by COVID-19. 

III. What kind of financial aid is the Czech Republic granting? 

1. Financial support measures – COVID II loan program for SME 
The COVID II loan program follows and is linked to the already suspended COVID I program. This aid is intended for SMEs only (with up to 250 employees and annual turnover of up to € 50 million). 

In COVID II, resources of commercial banks are involved. It enables applicants to draw government-guaranteed and subsidized loans from commercial banks. The guarantee is provided for loans in the amount up to CZK 15 million and covers up to 80% of such loans for a maximum of 3 years. The applicants might also apply for a State financial contribution to cover interest on guaranteed loans up to CZK 1 million. 

The guaranteed commercial loan shall be used only to cover operating expenses such as wages, rent, supplier-customer invoices, stock, etc. Subvention for any economic operation within Prague is excluded from this State aid. The loan program commences on 2 April 2020. 

2. Employment Support Program “Antivirus” 
The Antivirus Program can partially compensate the wage costs of employers for the duration of their employees’ (in employment) work-related obstacles due to quarantine, crisis or emergency measures related to containing the spread of COVID-19, incurred since 12 March 2020 (inclusive). The program shall last through 30 April 2020 (with the possibility 
of extension). The program is intended for all employers whose wages are not covered by public budgets. 

The Antivirus Program consists of the following two schemes:  

Regime A - Forced operation restrictions and quarantine 
 Employees who have been quarantined are receiving a wage compensation of 60 % of their average reduced earnings for 14 days. 
 Employees who have been prevented from working due to an ordered closure of the business operation are receiving a wage compensation of 100 % of their earnings. 

The amount of the employer´s financial State aid within Regime A represents 80 % of the abovementioned wage compensation, including public health and social coverage; the maximum amount is CZK 39,000 per employee per month. 

Regime B - Related economic difficulties 
 Employees are paid wage compensation in the amount of 100% of average earnings in the case when there is an absence of a significant proportion of employees in the workplace (30% or more) as a result of obstacles to work on their side.  

 Employees are paid wage compensation in the amount of 80% of average earnings in the case when there is a lack of resources (raw materials, products, services) which are necessary for work, i.e. delay time. 

 Employees are paid wage compensation in the amount of 60% of average earnings in the case when there is a decreased demand for the goods or services of the business operation. 

The amount of the employer´s financial State aid within Regime B represents 60 % of the abovementioned wage compensation, including public health and social coverage; the maximum amount is CZK 29,000 per employee per month. 

The Antivirus program commences on 6 April 2020. Applications will be accepted electronically only by the Czech Labour Offices with jurisdiction according to the employer´s registered office. 

3.Direct support for self-employed persons 

Self-employed persons will be able to obtain direct support for the period starting 12 March 2020 till 30 April 2020 in the amount of CZK 25,000 per month when meeting the relevant legal requirements. The bill has been already approved by the Government of the Czech Republic. The Ministry of Finance expects the legislative process to be completed and bill, 
therefore, introduced and published by 12 April 2020. 

4. Tax measures – additional 3 months period for filing tax returns and Tax reducing 
A 3-month delay in the filing of a 2019 tax return (income tax, corporate tax) is tolerated. The new deadline is, therefore, 1 July 2020; there is no need to apply for an extension. Any penalties are waived automatically, provided the tax return is filed and relevant tax paid within this extended period. 

For the real estate acquisition tax return, where the period for filing the tax return expires starting 31 March 2020 till 31 July 2020, it is possible to pay the tax until 31 August 2020, and there is no need to apply for such extension. 

VAT control reports still must be filed, but if this is not possible due to coronavirus, the tax administrator will automatically waive penalties for late reporting of the amounts of CZK 1,000 incurred for the period starting 1 March 2020 till 31 July 2020; other fines will be waived on individual requests. 

The Ministry of Finance is preparing an amendment to the Income Tax Act that will introduce the possibility of recovering losses – loss carry back, i.e. the possibility of applying a potential tax loss from 2020 retrospectively as the taxpayer will be able to deduct this potential loss accrued in 2020 from the tax base reported in 2018 and 2019. 

5. Electronic Records of Sales - suspension 
The overall suspension of the Electronic Records of Sales for the duration of the state of emergency as well as the following three months has been introduced. 

IV. What to consider when applying for State aid subsidy or financial support? 
For all applications, it should be kept in mind that it is always important to provide full information. In particular, in the case of State aid applications, it is always essential to provide accurate and truthful data and information. Otherwise, there is a risk that the State aid received will have to be reclaimed. In the case of requests for State aid subsidy and support, incorrect statements might be also investigated and assessed as a subsidy fraud, with a risk of imprisonment of up to 10 years. 

If you are dealing with any of the above stated issues or have any other questions connected to the current situation, please do not hesitate to contact us. We remain at your disposal. 

Mgr. Markéta Deimelová 
Partner, Taylor Wessing Praha 
m.deimelova@taylorwessing.com 

Mgr. Patrik Albrecht  
Associate, Taylor Wessing Praha 
p.albrecht@taylorwessing.com