SELF-EMPLOYED PERSONS - CORONAVIRUS
Waiver of advance payments for March to August 2020
In connection with the extraordinary measures related to the epidemic, the Parliament of the Czech Republic approved a government draft act that foregoes the obligation of self-employed persons to pay advance insurance premiums from March to August 2020 and subsequently forgives the minimum mandatory payments for pension insurance of self-employed persons for this period.
All self-employed persons performing major or subsidiary gainful activity are not obliged to pay advance pension insurance premiums from March to August 2020. The prescribed amount of advance pension insurance premiums does not matter. However, if the self-employed person pays or has already paid any of these advances, they will be used for any other already due liabilities and further as advance insurance premiums for September to December 2020.
There is no need to individually apply for the waiver of the obligation to pay advance premiums for March to August 2020, it is a legal regulation that will be applied to all self-employed persons by default.
Next year, when the self-employed person submits the Statement on Income and Expenses for the calendar year 2020, he / she will deduct the advances paid in 2020 from the resulting pension insurance premiums for 2020, but also deduct the following amount for the period from March to August 2020:
- CZK 2 544 for each calendar month in which major independent gainful activity was performed; or
- CZK 1 018 for each calendar month in which subsidiary independent gainful activity was performed.
An example for preparing a Statement on Income and Expenses of a self-employed person for 2020:
A self-employed person performing major independent gainful activity has its advance insurance premiums set in the amount of CZK 2 800 based on the Statement on Income and Expenses of a self-employed person for 2018 (hereinafter the “Statement”); this amount is valid until the Statement for 2019 is submitted. Such a person submits the Statement for 2019 in July (it should have been submitted by May 4); after deduction of advance premiums paid in 2019, there is an outstanding amount of CZK 4 175. Starting from the month following the month in which the Statement was or should have been submitted, i.e. from June 2020, the advance premiums are prescribed for the person in the amount of CZK 3 300.
In March 2021, such person will submit the Statement for 2020, while the premium for 2020 is CZK 37 020. The advances will be deducted from the insurance premium for 2020 which amounts to CZK 37 020. The advances are as follows: advances paid for January and February 2020 (2 x CZK 2 800); advances paid for September to December 2020 (4 x CZK 3 300); and advances that were not paid for March to August 2020, as there was no obligation to pay (6 x CZK 2 544). In total, the self-employed person will deduct CZK 34 064 from the 2020 insurance premium.
In order not to reduce the average income that is used for calculating the percentage assessment basis of pensions, the approved draft act stipulated that the period for which no advance insurance premiums were paid (March to August 2020) will be considered an excluded period when calculating the personal assessment basis in accordance with Section 16 of the Pension Insurance Act for a self-employed person performing major independent gainful activity.
Waiver of the sanction for late submission of the Statement on Income and Expenses of a self-employed person for 2019
In response to the possibility of submitting a personal income tax return for 2019 without sanctions until 1 July 2020, a self-employed person can submit a Statement on Income and Expenses for 2019 to the relevant DSSA within a longer period without sanctions as well; the Statement must be submitted no later than on 18 September 2020.
However, in order for the sanction for late submission of the Statement on Income and Expenses of a self-employed person to be waived, it is necessary to submit this Statement by 18 September 2020 and at the same time to pay any outstanding insurance premium calculated from this Statement. The day of payment shall be deemed to be the day the payment is credited to the relevant DSSA account.