New Czech subsidy program „COVID - Rent“ prepared by the Czech Ministry of Industry and Trade. Rent discounts and conditions for filing application in Czech Republic from June 26 to September 30, 2020
The subsidy program „COVID – Rent“ prepared by the Czech Ministry of Industry and Trade
The Czech Ministry of Industry and Trade has prepared a subsidy program „COVID – Rent“, which The Government of the Czech Republic took note of Resolution No. 550 at its session on May 18, 2020 to the Program COVID-Rent - Program to support entrepreneurs affected by the worldwide spread of COVID-19 virus disease SARS-CoV-19 COVID – RENT (hereinafter „Program"), contained in part III of material ref. 498/20, which is implemented on the basis of Act No. 218/2000 Coll., On budgetary rules and on the amendment of some related acts, as amended“. In addition to taking note of this program, the Government of the Czech Republic approved the release of an amount of up to CZK 5 billion to finance this program COVID – Rent at the same time imposed not only the implementation of this program, but also possible changes in its conditions and the amount of support. You can also read more information in the press release State aid related to rent payment in the context of COVID-19. The call was subsequently published on the website of the Czech Ministry of Industry and Trade on 19 June 2020, whereby the applications should be submitted electronically from 26 June 2020 to 30 September 2020: We are announcing a Call for COVID program - Rent, it will be possible to apply for subsidy from 26 June 2020 and despite the previous allocation of funds only up to CZK 5 billion, it should be increased if necessary to cover the applications of all eligible applicants.
Content of the subsidy program proposal „COVID – Rent“ in the Czech Republic was published on the website of the Government of the Czech Republic as Program to support entrepreneurs affected by the worldwide spread of the disease COVID-19 caused by a virus SARS-CoV-19 „COVID – Rent“. The content of the approved wording was published on the website of the Czech Ministry of Industry and Trade as CALL for the subsidy program for entrepreneurs affected by the worldwide spread of COVID-19 caused by the SARS-CoV-2 virus "COVID - Rent".
Grants under the program „COVID – Rent“ in the Czech Republic should be provided in accordance with Communication from the Commission for Temporary framework for State aid measures to support the economy in the current spread of coronavirus disease COVID-19, 2020/C 91 I/01, on March 20, 2020 as amended - consolidated version as of April, 4 2020 . Notification of this program has been requested at the European Commission. On June 12, 2020, the approval of this state aid by the European Commission from June 2, 2020 was published in the Official Journal of the EU under file No. No SA.57464 (2020 / N) in the form of the European Commission Authorisation for State aid pursuant to Articles 107 and 108 of the Treaty on the Functioning of the European Union — Cases where the Commission raises no objections (2020 / C 198/01).
Infographics of the Czech Ministry of Industry and Trade - Are you eligible for support from the Covid - Rent program?
Discount on rent and subsidy according to the proposal of the subsidy Program „COVID – Rent“ in the Czech Republic
The basic principle of the subsidy Program should be the provision of a state subsidy by the Czech state of 50% of the rent paid by entrepreneurs operating retail and service establishments, which had to be closed due to the declared state of emergency, provided that the tenant and the landlord agreed on a 30% rent discount. The final version of the Program is not available yet and it is also not yet possible to apply for this subsidy.
The tenant will therefore pay to the landlord 70% of the rent, with the state should receive 50% of the rent back as a subsidy and in fact will mitigate the negative effects of restrictions associated with measures against the pandemic COVID-19 for April, May, June 2020:
- Landlord 30% of the rent;
- Tenant 20% of the rent; and
- Czech state 50% of the rent.
These framework conditions and other conditions may change, as the call itself states: „… The support provider reserves the right to change the conditions of providing the subsidy. The support provider shall publish the changes on its website…. There is no legal entitlement to the subsidy….“.
The importance of getting acquainted with the individual conditions of the Program also follows from the fact that the applicant will have to waive further compensation from the state in connection with the rent for the period March, April, May, June 2020.
Advantages, disadvantages and possible risks associated with COVID-19 Rent subsidy Program
It is an indisputably advantageous possibility for the tenant to get a discount on the rent of up to a total of 70% of the rent for a total of 3 months, i.e. April, May and June 2020. The risk is the unpretentiousness of the subsidy, which may not be provided to the tenant. 30% below the landlord. It will depend on the content of the agreement between the tenant and the landlord whether the 30% discount is provided by the landlord immediately and the tenant does not risk returning the discount at some time in the future (some draft amendments to the lease prepared by the landlord provide such a possibility).
The tenant will have to waive the right to further compensation from the state in connection with the rent for March, April, May and June 2020, this waiver must be attached to the application and there is therefore a risk that the tenant will have to waive his rights, without being sure to receive a rent subsidy. At the same time, before submitting the application, the tenant must pay the rent for January and February 2020 and in the amount of the required subsidy for the months of April to June 2020, i.e. he must also finance the part of the rent (incl. VAT) for which he will apply for the subsidy. It can be assumed that the landlord will also condition the provision of a rent rebate by concluding an agreement that will force the tenant to fulfill certain other obligations, which will not necessarily be related to the subsidy, such as extension of lease, waiver of claims, payment of rent due etc.
It is debatable whether the landlord can provide the tenant with a higher discount on rent than only 30% of the program and it will be more certain that any additional discount should be spread over other time periods so that the conditions for drawing the subsidy by the tenant are not formally met.
Tenant must meet a number of conditions and if he provided false information in the application or was not an eligible entity, then he could bear the adverse consequences associated with the return of the subsidy in the future. The provision of the subsidy and its return is regulated by Act No. 250/2000 Coll., On budgetary rules of territorial budgets, as amended ("RPUR"). Section 22 (6) of the RPUR stipulates that “the subsidy provider shall invite the subsidy recipient in writing to return the subsidy or part thereof within the specified period if funds has been provided, has not complied with the purpose of the subsidy or the condition under which the subsidy was provided, for which remedial action cannot be called upon. To the extent that the subsidy recipient has returned the subsidy or its part, it is true that there has been no breach of budgetary discipline. possible variants of the procedure:
- fully comply with the call and return the funds to the required extent;
- to comply with the call in part and to reimburse part of the funds which it considers to be justified;
- completely not meet the challenge.
In the event that the beneficiary fully complies with the request and returns the funds in full, as requested by the provider, there is a legal presumption "that there has been no breach of budgetary discipline", or in the part corresponding to the extent of the refund, thus closing the whole case. The Provider does not initiate any levy proceedings, nor can it impose a levy, as there has been no breach of budgetary discipline in the legal sense. The same applies to the penalty payment, even though the recipient had public money available for some time. If the beneficiary does not comply with the request, the subsidy provider forwards the matter to the competent authority pursuant to Section 22, Paragraph 9 of the RPUR for proceedings on the imposition of a levy and a penalty for breach of budgetary discipline. An appeal against decisions on levies and penalties is admissible, which is decided by the bodies referred to in § 22 par. 10 RPUR, or subsequently also judicial review.
In connection with the preparation and submission of the application, it is also necessary to be aware that the tenant, as the applicant, may commit a subsidy fraud within the meaning of Section 212 of the Criminal Code, which stipulates that „(1) Whoever provides false or grossly distorted information or withholding information in an application for a subsidy, subsidy or repayable financial assistance or contribution shall be punished by imprisonment for up to two years or a ban on activity. (2) Equally punished will be those who use, to a lesser extent, funds obtained by a special-purpose subsidy, subsidy or repayable financial assistance or contribution for a purpose other than the intended one. (3) The offender shall be punished by imprisonment for a term of six months to three years if he commits an act referred to in paragraph 1 or 2 and if he has been convicted or punished for such an act in the last three years. (4) The offender shall be punished by imprisonment for one to five years or a fine if the acts referred to in paragraph 1 or 2 cause greater damage. (5) The offender shall be punished by imprisonment for two to eight years, a) if he commits an act referred to in paragraph 1 or 2 as a member of an organized group, b) if he commits such an act as a person with a special duty to defend the interests of the injured party, or c ) if it causes significant damage by such an act. (6) The offender shall be punished by imprisonment for five to ten years, a) if he causes extensive damage by an act referred to in paragraph 1 or 2, or b) if he commits such an act with the intention of facilitating or facilitating the crime of treason (§ 309), terrorist attack (§ 311) or terror (§ 312). (7) Preparation is a criminal offense.“
Although the draft of the Program does not explicitly state this, it can be assumed that without concluding a written agreement between the landlord and the tenant, the Landlord will not provide a discount to the tenant and the tenant would not be able to meet the conditions for obtaining the subsidy. If such an agreement is concluded, it can be assumed that its content may include other arrangements that may be beneficial to the landlord. Even if the parties adhere purely to the conditions imposed on the tenant by the Program, it may be advantageous for the landlord to satisfy the tenant, as the tenant without paying min. 50% of the rent for the months of April, May and June and 100% of the rent for January and February 2020 will not be able to draw the subsidy. Therefore, if the tenant has suspended the payment of rent, this may be an effective means for the landlord to force the tenant to pay the rent.
There is also a criminal risk on the part of the landlord to commit the crime of subsidy fraud in the sense of § 212 of the Criminal Code, as the landlord must also issue a solemn declaration to the tenant for the purpose of submitting the tenant's application for a subsidy, to the extent confirmed by.
Other conditions for the provision of a rental subsidy according to the draft subsidy Program „COVID – Rent“ in the Czech Republic
Ligible expenses according to the Program are only the payment of rent, or sublease in establishments on the basis of a lease or sublease agreement which, on the basis of extraordinary measures taken, prohibited the sale of goods and services in establishments, thereby reducing the ability to generate profit and pay rent. For the purposes of the Program, the lease or sublease of an establishment is not considered to be the provision of services to customers, and it will not be possible to apply for support twice if the establishment is leased and subsequently subleased. Only the entity that will actually operate the operating activity in the establishment will be able to apply for the subsidy.
If a fixed amount of rent is not determined (for example, for lease agreements with the calculation of the so-called turnover rent), only basic rent without the turnover component relating to the months of April, May, June 2020 is eligible expenditure.
The condition for the state rent contribution is an agreement between the tenant and the landlord on a 30% discount on the rent. If the landlord is the state, the discount will be provided automatically. The amount of rent from which the discount will be provided will have to be substantiated by proof of payment of rent for the previous period, in order to avoid a purposeful increase in rent.
Eligible applicant for a subsidy on rent according to the draft subsidy Program „COVID-19 – Rent“ in the Czech Republic
An eligible applicant is one who meets all of the following conditions:
a) It is a natural person - an entrepreneur or a legal entity.
b) It carries out business activities on the basis of Czech Act No. 455/1991 Coll., On Trade Licensing (Trade Licensing Act), as amended, or carries out business activities on the basis of a legal regulation other than the Trade Licensing Act.
c) It uses an establishment which is not owned by it, on the basis of a valid lease agreement concluded with the lessor before 12 March 2020.
d) As a result of the emergency measures taken in connection with the COVID-19 pandemic, he was banned from selling goods and services on premises for at least part of the period from 13 March to 30 June 2020.
e) It is not a related party with the lessor of the premises for the establishment (see the definition in Appendix No. 1 of the Program).
f) It is not in delay with the payment of any of its obligations to selected institutions4 due by 12 March 2020. (Agreement on installments or deferral of tax pursuant to Section 156 of the Tax Code, Act No. 180/2009 Coll. )
Conditions for providing support for rent according to the draft subsidy Program „COVID – Rent“ in the Czech Republic
The conditions for the provision of the subsidy are:
- Granting of a discount by the landlord in the amount of 30% of the rental price for the period of April, May and June 2020. (It is permissible that an agreement or supplement to the lease agreement was concluded between the landlord and the aid applicant before submitting the application.) who has leased premises from the state, this condition does not apply.
- The applicant must pay 50% of the monthly rent for the period of April, May and June 2020 in the manner and within the usual period according to the valid lease agreement, or by the end of the lease agreement, if it occurs before June 30, 2020. postponement of rent payments by the applicant for support on the basis of Act. No. 210/2020 Coll., or by an agreement between the aid applicant and the landlord, the condition of the first sentence is considered fulfilled if 50% of the monthly rent is paid by the aid applicant for the period April, May and June 2020 no later than the day before by submitting an application for a subsidy.
- In the case of support for an applicant who has leased premises from the state, payment of 80% of the monthly rent by the applicant for support for the period of April, May and June 2020 in the manner and within the usual period under the applicable lease, or until the end of the lease, it will take place before 30 June 2020. If the rent payments by the applicant for support have been postponed on the basis of Act no. No. 210/2020 Coll., or by an agreement between the aid applicant and the landlord, the condition of the first sentence is considered fulfilled if 80% of the monthly rent is paid by the aid applicant for the period April, May and June 2020 no later than the day before by submitting an application for a subsidy.
- Only one application for a subsidy according to this Program can be related to the rented space. Only if more than one tenant operates in the same establishment as part of his business activity, the applicant may apply for support only for the part of the lease which relates to that part of the establishment which he used for the purposes of his business, or for a proportion of the time range. use of the establishment. (This is, for example, a situation where tenants take turns using the business.)
Form and amount of support for rent according to the proposal of the subsidy Program „COVID-19 – Rent“ in the Czech Republic
The aid is provided to the aid recipient in the form of a rent subsidy. The subsidy will be provided on the basis of the Decision on the provision of the subsidy issued by the support provider (hereinafter „Decision“).
The aid is subsidyed for the entire period of April, May and June 2020 at the most, if the entrepreneur was prohibited from selling goods and services in establishments for at least part of the period from 13 March to 30 June 2020. In the event that the lease expires or to end before 30 June 2020, only a subsidy can be requested for the duration of the lease of the establishment.
An applicant may submit only one application per establishment.
The amount of aid per beneficiary is 50% of the monthly rent for the period of April, May and June 2020, while meeting the conditions:
i. Provision of a 30% discount on rent by the landlord according to Article 4 letter a).
ii. Payment of 50% of the rent by the tenant according to Article 4 letter b).
In the case of renting an establishment whose lessor and the real estate in which the establishment is located is the state, the amount of support is 80% of the total rent for the months of April, May and June 2020, provided that the condition of payment of 80% of the rent by the state tenant is met.
Eligible expenses, when converted into one month, may not exceed the amount of the original monthly rent proved by the tenant before 12 March 2020.
If VAT is charged on the rent, it is not an eligible expenditure and no aid can be drawn on it. The amount of support according to the wording of this Program is always calculated without the relevant VAT rate.
The support is provided up to the unspent amount of the Temporary Framework of the European Commission per one beneficiary, according to the CNB exchange rate valid on the effective date of this Program, but up to a maximum of CZK 10 million.
Other conditions of rent support according to the draft subsidy Program „COVID – Rent“ in the Czech Republic
The Beneficiary is obliged to keep the documentation associated with the acceptance of the aid, in particular the lease agreement and all its amendments, for a period of 10 years from the date of issue of the Decision.
The beneficiary is obliged to allow the provider, resp. other control bodies, control of the relevant documentation.
The support provider reserves the right to change the conditions of providing the subsidy. The support provider will publish the changes on its website.
It is not possible to obtain other support for eligible expenditure supported under this Program within the relevant period, which is April, May and June 2020.
The support is provided from the announcement of the call by the Support Provider no later than 31 December 2020.
Application for rent support according to the draft subsidy Program „COVID – Rent“ in the Czech Republic and the method of its submission/strong>
The submission of the application will be made by the applicant for support to the MIT in electronic form. The method of submitting the application will be specified in more detail in the Call announced by the Ministry of Industry and Trade as the provider of support on the basis of the Program. The application will be evaluated and, if the aid is approved, it will issue a Decision.
The application for support includes:
a) Affidavit of the beneficiary that:
● All information provided is true;
● Is an eligible applicant under Article 3 of the Program;
● When submitting the application, he was and for the entire period of drawing support was a business entity authorized to run a trade or other business activity in the leased establishment, for the lease of which support is requested;
● Has not interrupted the operation of a trade, or the operation of a trade has not been suspended or it has not interrupted the operation of a business activity on the basis of a legal regulation other than the Trade Licensing Act;
● Is a tax subject according to Act 280/2009 Coll., the Tax Code;
● Has no arrears to selected institutions and to providers of support from projects co-financed by the European Union budget until 12 March 2020. Late payments of taxes or levies related to the spread of COVID-19 caused by the SARS-CoV-19 virus on the basis of liberalization funds are not considered arrears. packages of the Ministry of Finance or measures of the Ministry of Labor and Social Affairs;
● As at 31 December 2019, it was not a firm in difficulty within the meaning of the block exemptions;
● The court did not declare bankruptcy on its property pursuant to Act No. 328/1991 Coll., on Bankruptcy and Settlement, did not allow settlement or did not reject the proposal to declare bankruptcy due to lack of assets;
● Pursuant to the provisions of Section 136 of Act No. 182/2006 Coll., on Bankruptcy and Ways of Resolving It (Insolvency Act), no decision was made on its bankruptcy;
● Tthe court or administrative body has not issued an order ordering the enforcement of the decision on his property or has not ordered the execution of his property;
● Is not in liquidation;
● The company or business activity does not meet the conditions of the Insolvency Act for the commencement of collective insolvency proceedings, with the exception of those companies or business activities that meet the conditions for the commencement of collective insolvency proceedings due to the spread of COVID-19 caused by SARS-CoV-19;
● Waives further compensation from the state in connection with the rent for the period March, April, May, June 2020;
● Notes the processing of personal data for the purposes of Program administration;
b) Affidavit of the landlord (an affidavit of the authorized person acting on behalf of the landlord is also admissible), which will prove that:
● There is or has been a lease agreement between the beneficiary and the lessor that was concluded before 12 March 2020, indicating the date until which the lease lasts or is concluded for an indefinite period;
● The lessor is not a person related to the beneficiary.
● A document confirming the payment of rent for the months of January and February 2020. If the application did not expire on the day of submission of the lease under the lease agreement for February and January 2020, you can also provide a document confirming payment of rent for October, November, December 2019. lease agreement concluded after 31 January 2020, the document will be accompanied by proof of payment of a proportional part of the rent from the conclusion of the lease agreement until 12 March 2020;
● A document confirming the payment of part of the rent for the given establishment in the amount of the required subsidy;
● The draft agreement signed by the applicant that all claims of the applicant against the Czech Republic in respect of compensation for damage caused by the measures referred to in point 3, letter d) of this call.
● In the case of support under point 5 d) of the Program, a document confirming payment of VAT from 70% of the rent for the period from 1 April 2020 to the date of submission of the application for support, if the payment of this rent occurred by the date of submission of the application for support.
● In the case of support for an applicant who leases an establishment from the state, a document confirming payment of VAT from 80% of the rent for the period from 1 April 2020 to the date of submission of the application for support, if the due date of this rent occurred.
For more informations contact us at:
JUDr. Mojmír Ježek, Ph.D.
ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Praha 1
About ECOVIS ježek, advokátní kancelář s.r.o.
Czech law firm ECOVIS ježek focuses in its practice primarily on bussines law, real estate law,