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Information on compensation bonus for partners of limited liability companies - tax non-residents

Explanation of application of compensation bonus for partners of limited liability companies, non-residents, according to the Act No. 158/2020 Coll. on Compensation bonus (in connection with Covid-19).

Information concerning application of section 2a, subsection 4, letter b), point 2 of the Act on Compensation Bonus for EU/EEA residents

Pursuant to section 2a, subsection 4, letter b), point 2 of the Act No. 159/2020 Coll., on Compensation Bonus as amended, in connection with the crisis measures in respect of the new coronavirus SARS CoV-2, (hereinafter only the “Act on Compensation Bonus”), the subject of compensation bonus cannot be a partner of a limited liability company which was not as at 12 March 2020 a tax resident of other EU or European Economic Area member state and did not reach most of the income for the relevant period in accordance to letter a) of the same subsection from the sources in the territory of the Czech Republic.

According to the opinion of the Ministry of Finance:

„The reason for the mentioned restriction is not to enable using the compensation bonus in relation to limited liability companies with a seat, or respectively, main business activities abroad, where the company (or its partner) may be recipient of similar financial aid provided by other member state, which could lead to undesirable cumulation of the aid.

Nevertheless, according to the existing wording of the Act, it is not examined if the company (or its partner) received the given aid abroad, the mentioned statutory condition is applied uniformly.

Based on preliminary consultations with the European Commission in the framework of the Act on Compensation Bonus notification, there might be a risk of not complying with the regulations of the European internal market due to the uniform excluding of the entitlement for compensation bonus for a partner of a limited liability company if the company is registered in other member state of EU/ European Economic Area. Specifically, it is the risk of contradicting article 26, section 2 of the Treaty on the Functioning of the European Union (hereinafter only “TFEU”) concerning the internal market and fundamental freedoms, particularly Head IV TFEU - Free movement of persons, services and capital (articles 45, 49 a 56 of TFEU).“

At the same time, the Ministry of Finance deduces the following information:

„If the wording of the Act excluding the entitlement to compensation bonus for partners of limited liability companies that are residents of other EU member state is found as contradicting the regulations of internal market, it is possible to accept the eligibility for compensation bonus based on preferable application of European law provided it will comply with regulations for financial aid cumulation in accordance with EU law taking in respect other possible comparable financial aid given to the person by other member state. Therefore, the application for compensation bonus will be treated with regard to this regulations.”

Taking into account the fact that the deadline for submitting the application for compensation bonus in case of the first bonus period terminated on 29 June 2020, provided other statutory requirements are met - pursuant to section 37 of law 280/2009 Coll., the Tax Code, as amended - it is possible to use so called restoration of the time-limit (for submitting the application for compensation bonus), that is a reversion to the previous time limit. The application for restoration of the time-limit into the previous time limit has to be filed to the bonus administrator within 15 days beginning the day, on which the reason for belated time-limit ceased (as the day of ceasing the reason is treated the day of publishing this information).

The application for restoration of the time-limit into the previous time limit is subject to administration fee at the amount of 300 CZK.

In this case the compensation bonus may be paid after the decision on restoration of the time-limit into the previous time limit, which may apply also in the case when the application for compensation bonus is submitted at the same time with the application for restoration of the time-limit into the previous time limit. It is appropriate to include information on the scope (number of days, or until which date) of the restoration of the time-limit in the application for restoration of the time-limit into the previous time limit. In addition, it is necessary to add clear identification that the application is filed due to reasons described in this information. It is not possible to file the application for restoration of the time-limit into the previous time limit by e-mail.