Changes in social and medical insurance payment for entrepreneurs in 2020
Due to the epidemiological situation in the country, the Parliament of the Czech Republic adopted a number of measures that will help entrepreneurs survive the decline in their economic activity in 2020. The changes will be related to social and medical insurance advance payments as well as to the terms of submitting profit reports for 2019 to the medical and social insurance authorities. Let’s take a closer look at these changes in regard to each institution.
An individual entrepreneur (ed. from Czech “OSVČ”) is exempt from advance payments for social insurance from March to August (inclusively) of 2020. During this period the minimal mandatory pension insurance payment will be completely canceled for both entrepreneurs whose business is their main activity (ed. from Czech “hlavní činnost”) and whose business is an additional activity (ed. from Czech “vedlejší činnost”). Thus, the amount of support in the social insurance field from March to August of 2020 will equal:
- for entrepreneurs whose business is their main activity – 2544 corunas per month (total: 2544*6=15264 CZK)
- for entrepreneurs whose business is an additional activity – 1018 corunas per month (total: 1018*6=6108 CZK)
If the entrepreneur made the insurance payment for this period partially or in full, it will be used for the payment of other obligations to the social insurance institutions or will be used for submitting advance payments for the period from September to December of 2020. It is not necessary to request this support measure from social insurance institutions, it will be applied to all entrepreneurs in 2020 automatically. It will be necessary to deduct all the advance payments that were made in 2020 (for January – February, September – December) in the annual report to social insurance authorities for 2020 as well as the minimum mandatory social insurance amount for March – August, from which the entrepreneur was exempt as if these amounts were paid.
Here is an example:
An entrepreneur whose business is the main activity filed a social insurance report for 2018 on the 31st of March, 2019. On its basis, the advanced payment for 2019 was 2700 corunas per month (is paid in the period from April 2019 to March 2020). The entrepreneur filed an annual report on social insurance for 2019 on the 31st of March 2020. On its basis, the advance payment for 2020 is 3500 corunas per month (is paid from April 2020 till March 2021). In accordance with the annual report for 2020, the amount of deductions is 36500 CZK.
The social insurance surcharge for 2020 is calculated the following way = 36500 CZK – 2700*2 (social insurance paid for January and February of 2020) – 2544*6 (social insurance payment for March and April of 2020, which the entrepreneur is exempt from) – 3500*4 (social insurance paid for September – Devember 2020) =1836 CZK
The cancellation of a minimum social insurance payment for the period from March to August of 2020 will not affect the average profit amount which influence the pension calculation (applies only to entrepreneurs whose business is the main activity) since the mentioned period for these purposes will be excluded.
Terms for annual reports submission and insurance payments:
Due to the fact that the Ministry of Finance in the Czech Republic approved the possibility of submitting the annual Declaration of individuals for 2019 to the 1st of July, 2020 without penalties, the annual social insurance report can be submitted until the 3rd of August, 2020 without any fees as well. To avoid paying a fee, it is required not only to file the social insurance report itself for 2019 till the 3rd of August 2020 but also to pay for the social insurance based on the annual report till the mentioned date. Another key point is that the date of payment is considered to be the day the sum was credited to the social insurance account balance.
As for the medical insurance advance payments the situation is similar. All the entrepreneurs are exempt from the minimum advance payment in the amount of 2352 CZK for the period from March to August (inclusively) 2020. If based on the annual medical insurance report for 2019 the amount of monthly advance payment equaled more than 2352 CZK per month, the difference is to be paid but during the annual medical insurance report submission for 2020 (spring of 2021) i.e. the payment of the minimum amount is not canceled but postponed to a later period. Similarly as with the social insurance, partial and full coverage of advance payments from March to August 2020 is offset by payment of health insurance for subsequent months.
The new law of state medical insurance implies new terms for annual medical insurance report submission and insurance payment for 2019. It is necessary to file a report not later than the 3rd of August of 2020 and to pay during 8 days from the moment of submission of the report. If, for instance, you filed a report in March of 2020 and pay for insurance in August of 2020 you will be charge a penalty. Please be careful in this matter.
Attention! The cancellation of minimum health insurance payments does not apply to persons without taxable income (samoplátce) as well as to the payment of health insurance payments for employees.
Would you like to be aware of tax regulation updates and know your rights and opportunities? Subscribe to our newsletter and you will not miss any news.