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8 June 2021

Compensation Bonus Act for 2021

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Conditions of entitlement for an LLC member

By Weinhold Legal

Act No. 95/2021 Coll., On the compensatory bonus for 2021, was published in the Collection of Laws on 26 February 2021. The government bill reflects the state of emergency and follows on Act No. 159/2020 Coll., On the Compensatory bonus in connection with crisis measures in connection with the occurrence of coronavirus SARS CoV-2, as amended, and Act No. 461/2020 Coll., on a Compensatory bonus in connection with the prohibition or restriction of business activities in connection with the occurrence of coronavirus SARS CoV-2, as amended.

In comparison with the older regulation there is a change in a broader definition of the circle of beneficiaries and the amount of support provided. Below we will describe the conditions for the right to a compensation bonus for members in limited liability companies.

Compansation Bonus

The compensation bonus will apply only to those companies that have a maximum of two natural person members, a higher number is accepted only in the case of members of one family. The subject of the compensatory bonus for limited liability companies cannot be the executive director of this company, unless he/she is also a member. Another condition is that the members' shares must not be in the form of equity certificates. Entitlement to the compensation bonus is not limited if the member as an employee of this company is covered by health insurance. Neither is the bankruptcy of a member an obstacle to obtaining the bonus.

Nevertheless, the fact that the company is in bankruptcy or liquidation is an obstacle to the payment of the compensation bonus. Also, a member will not be entitled if the company’s turnover has not exceeded CZK 180,000 in any of the previous completed tax periods.

Compansation Bonus Conditions

In order for the bonus to be used, it is necessary that the company's activities are significantly affected as a result of the health threats associated with the coronavirus epidemic or as a result of the adoption of crisis measures. Whether these facts can be qualified as a significant impact on the company's activities is assessed according to the test of income decline using the comparison period - this can be either the previous calendar month or 3 consecutive months (with the same names as the months for which support is requested) in the period from 1 November 2018 to 31 December 2020. The decrease in income must be by 50% of the average income over the reference period.

Where the member is in quarantine or isolation, the affectedness is not determined, but during this period the activity is automatically considered to be significantly affected for the purposes of the member's entitlement to the compensation bonus. Therefore, if the other conditions are met, the member is entitled to a compensation bonus even without the income decline test.

Another test that must be met is the test of the majority income from the activity significantly affected. This can again be done in the comparative period mentioned above, the second option being the relevant period, which means the period from 1 June 2020 to 30 September 2020. The condition is met if the company’s income from its own activity, but also her members income in comparison to the comparative, or. decisive period, is prevailing. This second test is performed only if the result of the first test is positive.

Compansation Bonus Amount

The amount of the compensation bonus is CZK 1,000 per calendar day of the bonus period. In the case of quarantine or isolation of a member, the compensation bonus is CZK 500 per calendar day of the bonus period.

Source: Weinhold Legal, Legal Update, May 2021

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