COVID-19: Measures in the area of insurance of self-employed individuals – update

COVID-19: Measures in the area of insurance of self-employed individuals – update

Social security

The Senate has approved today afternoon a bill saying that no social security advance payments for March until August 2020 will be due.

On the annual basis, the amounts due for the months March till August 2020 will be decreased by CZK 2,544 per month (for those who have self-employment activity as main income) and CZK 1,018 per month (for those who have it as subsidiary activity).

Health insurance

Similarly, the Senate confirmed that also in the area of health insurance no late payment penalties will be assessed on late paid advance payments for the months March till August 2020 (for the period until 21 September 2020).

In addition, the advance payments for March till August 2020 in the minimum amount do not have to be settled at all.

For those who pay higher than the minimum payments, they will be obliged to repay for these months only the amount that exceeds the minimum payments, but can do so also only once filing the annual report for 2020.

Further, the deadline for filing the annual report for 2019 should be extended from 4 May until 3 August 2020.

The bills now only need to be signed by the President.

Update regarding COVID-19 measures

Update regarding COVID-19 measures

Following the steps taken by the respective ministries, I have summarized below the main meassures that have been already approved or are under discussion in the area of taxation and social security and health insurance with respect to the current state of emergency.

Tax measures

The Ministry of Finance and the Financial Administration are gradually responding to the current situation.

On 16 March 2020, the Government approved the so-called Liberation Package, which includes in particular the following measures:

Flat waiver of late filing penalty of personal and corporate income tax return and late payment interest until 1 July 2020, i.e. taxpayers are effectively allowed to file their income tax returns at the latest 3 months after the statutory deadline without the need to prove coronavirus-related reasons.

Waiver of tax return late filing penalty in all cases where interest for late payment, tax repayment or penalty for failure to file a VAT control report is individually waived by the tax office.

General waiver of fines for the late submission of a VAT control report of CZK 1,000 incurred between 1 March and 31 July 2020.

Possibility of individual waiver of a fine for failure to submit a VAT control report for the period from 1 March to 31 July 2020 if coronavirus-related reasons are proved.

General waiver of the administrative fee for filing an application for delaying or repayment of tax, the application for remission of a fine for failure to submit a VAT control report (for applications submitted by 31 July 2020).

On 22 March 2020, the Ministry of Finance, within the framework of the Liberation Package II, proposed further measures:

General waiver of the June advance tax payments for personal and corporate income tax. This means that the June advance payment (otherwise due by 15 June 2020) would not be paid at all.

General waiver of a fine for late filing of a real estate property acquisition tax return or for a late payment of a real estate property acquisition tax or an advance payment. The waiver would apply to all late tax returns with a deadline from 31 March to 31 July 2020. It should be possible to file a real estate acquisition tax return by 31 August 2020 at the latest without the risk of a penalty, interest on late payment would also be remitted. Effectively, all taxpayers would automatically be allowed to file the real estate property tax return up to five months later.

• Introduction of Loss carryback for both personal and corporate income tax for 2020. It should be possible to apply it in the 2019 and 2018 tax returns.

Suspension of the obligation for electronical record of sales („EET“) for entities in all phases of the EET for the period of state emergency and the following three months.

Social security and health insurance measures

The Ministry of Labor and Social Affairs responds similarly to the situation. On 19 March 2020, the so-called Antivirus program, which aims to protect employment, was approved by the Government. The state will compensate firms for the costs of incapacity for work under the quarantine order and, in part, for compensation for wages if there are obstacles on the side of the employer if it is shown that the obstacle to work is due to COVID-19.

The compensation will be provided by the Labor Office of the Czech Republic, the amount and duration of the support will depend on the reason of the obstacle at work.

Mode A – Quarantine employees

Scheme A is intended to contribute to employers’ paid wage compensation in the event of incapacity for work for employees who are subject to quarantine. The employer pays compensation for incapacity for work for the first 14 calendar days, the amount of compensation is 60% of the average assessment base. The employer will be provided with the full compensation of wage compensation paid.

Mode B – Inability to assign work to employees due to the government emergency measures

Scheme B concerns situations where an employer cannot allocate work to employees because of government emergency measures, i.e. the employer is ordered to close down operations following a government resolution. In such a situation, employees are entitled to wage compensation equal to their average earnings. The compensation to the employer should be 80% of the compensation paid.

On 23 March 2020, the government approved further measures proposed by the Ministry of Labor and Social Affairs, which should support other companies and extend the Antivirus program by three additional regimes:

Mode C – Inability to assign work to employees due to quarantine or childcare for a significant proportion of employees.

It should be considered a significant part if it is 30% of employees of companies, establishments or other organizational part according to the operating situation of the employer. Compensation of wages or salaries should be paid to the employee at 100% and the employer should be provided a compensation of 80% of the compensation paid.

Mode D – Restricting the availability of inputs (raw materials, products, services) necessary for the employer’s activity as a result of quarantine measures (or generally production failures) at the supplier, including abroad.

For example, there is an agreement proving the origin of inputs, bans on actions or other measures demonstrably affecting supplies to the employer. Compensation of wages or salaries should be paid to the employee of 80% and the employer should be provided a compensation of 50% of the compensation paid.

Scheme E – Reduced demand for employer’s services and products as a result of quarantine measures at the employer’s point of sale (CR and abroad).

Compensation of wages or salaries should be paid to the employee in the amount of at least 60% and the employer should be provided a compensation equal to 50% of the compensation paid.

On 20 March 2020, the Ministry of Labor and Social Affairs sent a draft law to the interdepartmental comment procedure for the waiver of compulsory pension insurance payments for self-employed individuals for a period of 6 months. If approved, the measure should be effective as of March. The proposal has so far been approved by the government on 23 March 2020, including a waiver also of the compulsory health insurance payments.

The area of ​​paid nursing is also discussed. It is still true that if an employee has to take care of a child under 10 years after the end of 9 days of nursing (16 for single parents), he / she can stay at home, but only on an unpaid leave. The employee will receive wage compensation only on the basis of an agreement with the employer, but there is no obligation.

Today, the Parliament shall approve an amendment to the law that will ensure that nursing allowance could be drawn for the entire period of school closures (also retroactively). Thus, if the law is passed, employees will be reimbursed for the entire period they were at home taking care of their small children.

Social Security and Health Insurance after Brexit

On 29 January 2020, the European Parliament approved the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union.

In the area of ​​social security and health insurance, this report means that the current European rules – Regulations on the coordination of social security systems No. 883/2004 and 987/2009, which, among other things, includes the principle of single insurance – will continue to apply , govern the use of the European Health Insurance Card and the provision of the necessary care based on it, the use of forms S1, E106, E109 and E121 for taking full care in the State of residence, or issuing of A1 Certificates for the determination of applicable legislation.

These rules apply for a transitional period – until the end of 2020. Thereafter, they will only apply to situations that arose before the end of 2020. The exact course of action after 2020 will also depend on whether and how the future EU-UK relations will be governed.

Increase of the minimum wage and its impacts

The minimum wage was increased as of 1 January 2020 by CZK 1,250 to CZK 14,600.

The increase of the minimum wage has an impact not only on the employer, who is obliged to pay the salary to his employees reaching a minimum of CZK 14,600 per month for the “lowest” group of jobs, but at the same time it also has an effect on tax and other liabilities.

According to the Income Tax Act, in some cases the minimum wage has an impact on the total tax liability. The above-mentioned relates for example to income, which the taxpayer obtains in the course of the year in the form of pension payments. The tax-free sum, which the taxpayer does not declare and tax in the given taxable period, is set based on the minimum wage. A total sum of this income, which does not exceed 36 times the minimum wage, i.e. in the year 2020 regularly paid pension up to CZK 525,600 (CZK 43,800 per month) is exempt from taxation. 

The increase of minimum wage is also reflected in the area of tax deductions. The adopted change impacts the chance of parents to receive a tax advantage in the form of a so-called child tax credit. The child tax credit represents the part of the child tax deduction that exceeds the final tax and is actually paid by the tax office to the taxpayer. With the increase of the minimum wage, the specified limit for the possibility of obtaining tax credit raises. In 2020, a taxpayer, whose income reached at least 6 times the minimum wage, i.e. a parent with annual income exceeding CZK 87,600, is entitled to the tax credit. Here it needs to be noted that this income currently includes only taxable income from employment or self-employment, i.e. the taxpayer’s “active” income.

The rate of the minimum wage also impacts the maximum possible tax deduction of “kindergarten fees”. The allowance for placing a child in a childcare facility corresponds to the expenses provably spent by the taxpayer on placing a dependent child in a pre-school facility, but only up to the level of the minimum wage per every dependent child.

In addition, the minimum wage impacts also the minimum health insurance payments for employees as well as for persons without taxable income. Persons without taxable income generally do not perform gainful activity, employed or self-employed, during the entire calendar month, but at the same time they do not fulfil the conditions for so-called state-insured persons, for whom the minimum insurance is paid by the state. In case of persons without taxable income, the minimum wage is their assessment base and in the year 2020 as a result of its increase, they are obliged to pay CZK 1,971 per month to health insurance companies, i.e. 13.5 % from CZK 14,600. At the same time, this minimum payment needs to be observed by employers for instance in case of an employee, who works part-time for lower than a minimum wage, or an employee on unpaid leave. Such an employee should prove to his employer that for example at a different employer the minimum payment of insurance is settled.

Another indirect effect of the increase of minimum wage is on persons registered at the labour office who can earn a maximum of CZK 7,300 extra, i.e. up to a half of the minimum wage.

Changes in health insurance advance payments from January 2020

Changes in health insurance advance payments from January 2020

Do you pay the minimum health insurance contributions in the CR as self-employed (in Czech “OSVČ”) or individual with no taxable income (in Czech “OBZP”)? Then you should make sure that you adjust your payments now.

Monthly health insurance contributions are due until the 8th of the following month, i.e. for January until the 8th February.

Due to the increase in average salary every year, the minimum contributions increase as well.

Since 1 January 2020, the minimum advance payments of self-employed persons have been increased to CZK 2,352 (instead of the current CZK 2,208). This amount has to be paid as of the advance payment for January (due date till 8 February 2020).

Due to the increase in the minimum wage, the OBZP insurance premium and the minimum insurance premium for employees also increases to CZK 1,971 (instead of the current CZK 1,803).

Belarus-Czech Agreement on Social Security

Belarus-Czech Agreement on Social Security

The Totalization Agreement between the Czech Republic and the Republic of Belarus, signed on 14 March 2018, entered into force on 1 October 2019. An Administrative Arrangement for the implementation of the Agreement also came into force on 1 October 2019.
The treaty is based on the four basic principles that are common in modern totalization treaties and in the European Union coordinating regulations, namely:

  • Equal treatment of nationals of the Contracting States
  • Affiliation to insurance in the State of employment, with specific exceptions
  • Aggregation of periods of insurance completed in both States for entitlement to benefits (pension)
  • Payment of benefits (pensions) to the other Contracting State

The material scope of the Agreement is limited as it covers only pension insurance benefits, i.e. old-age, disability, widow’s, widower’s and orphan’s pensions in the Czech Republic, and in Belarus so-called occupational pensions, i.e. old-age, retirement, long-term, disability and for loss of the breadwinner. The Agreement shall also apply to the laws of both Contracting States governing the payment of insurance premiums. The contract does not cover sickness insurance, accidents at work and occupational diseases, unemployment benefits or health insurance.

What kind of health insurance card can you get as a foreigner in the CR?

What kind of health insurance card can you get as a foreigner in the CR?

As an EU national insured in the CR you receive a standard blue European health insurance card based on which you are entitled to full health care in the CR and necessary health care in the other states of EU, EEA and Switzerland. As the card is valid in the above mentioned states, it has a standardized form.

Citizens from countries outside the EU who work in the CR receive a green health insurance card. Compared to the blue European health insurance card the green card is valid only in the CR and is generally issued for one year.

People who are registered with VZP as a Czech assistance insurance company (mostly foreigners paying mandatory insurance in another EU country) receive yellow cards. These are usually valid for one year and indicate to which kind of health care the holder is entitled (e.g. full care or necessary care).

Všeobecná zdravotní pojišťovna (VZP) has started to issue the green and yellow cards with slightly changed colour shades as of this week:

Source: vzp.cz
Health Insurance after Brexit

Health Insurance after Brexit

According to current information, the United Kingdom is to leave the EU on 31 October 2019. Given the variability of the situation, it is still uncertain how exactly Brexit will happen. There are three scenarios for the area of health insurance, each affecting health insurance and the provision of health services to Czech policyholders in the UK and UK policyholders in the Czech Republic in a different way.

Scenario 1 – Another postponement of Brexit for later

Due to previous delays, further postponement cannot be excluded. Should Brexit be postponed until a later date, the existing EU rules would continue to apply until the new Brexit date.

Scenario 2 – Brexit with a deal

If the Withdrawal Agreement is approved, all existing rules will continue to apply until the end of 2020. The principle of a single insurance would continue to apply (i.e. individuals cannot be insured in the UK and the Czech Republic at the same time). European Health Insurance Card would continue to apply.

Scenario 3 – Hard Brexit

This scenario would have the greatest and immediate impact on health insurance. The current EU health insurance rules would cease to apply on the Brexit date and the United Kingdom will find itself in a third country position with certain benefits for persons who were in a cross-border situation prior to the Brexit date thanks to the 2019 EU Regulation that provides for alternative measures in the field of social security coordination following the withdrawal of the United Kingdom from the EU. This new regulation contains a rule on equal treatment, the principle of assimilation of facts and addition of periods of insurance. This new Regulation is to take effect from the date of Brexit. Otherwise, the Czech Public Health Insurance Act will apply.

It will no longer be possible to use the European Health Insurance Card. Some areas of this scenario also still remain unclear.

Validity of EHIC abroad

Validity of EHIC abroad

When traveling abroad, it is wise to remember unpleasant surprises. It is always good to have insurance in case of illness or accident. Did you know that in the European Union, Norway, Liechtenstein, Iceland and Switzerland your Czech public health insurance is valid?

On the basis of the European Health Insurance Card (Blue Health Insurance Card, “EHIC”), you are entitled to receive the health care required by your health condition for the duration of your stay under the same conditions as the local insured. For example, if something happened to you on vacation, the local medical facility would treat you as they would treat the local insured.

In fact, within the EU, you are entitled to medically necessary health care taking into account the nature of the benefits (illness) and the expected duration of your stay in another country. Care should be provided so that the patient does not have to return to the country of insurance earlier than originally intended.

You only pay for the treatment as much as the local insured would pay for it (regulatory fee, prescription fee, hospitalization, etc.). However, the care costs themselves will be billed to your Czech health insurance company. Last year, 45,000 Czech insured persons were treated abroad and health insurance companies paid a total of CZK 520 million for these treatments.

In addition to the EHIC, you can choose a supplementary commercial travel insurance, which may provide some additional benefits. When concluding a commercial travel insurance, carefully read the insurance terms and conditions.

EU Work-life Balance Directive

EU Work-life Balance Directive

The European Council adopted the proposal for a Directive on work-life balance for parents and carers on 13 June 2019.

The European Commission decided to take a broader approach in addressing women’s underrepresentation in the labour market and the work-life balance challenges faced by working parents and carers encouraging better sharing of caring responsibilities between women and men.

The proposal includes the:

> Introduction of at least 10 working days paternity leave. Fathers/equivalent second parents should be able to take this leave around the time of birth of the child, compensated at least at the level of sick pay.

> Strengthening of the existing right to 4 months of parental leave, by making 2 out of the 4 months non-transferable from a parent to another, compensated at a level to be set by Member States and taken in a flexible way (e.g. part-time).

> Introduction of carers’ leave of 5 days per year for workers providing personal care or support to a relative or person living in the same household. 

> Extension of the existing right to request flexible working arrangements (reduced working hours, flexible working hours and flexibility in place of work) to all working parents of children up to at least 8 years old, and all carers.