Czechia pays out CZK 48 million in Covid compensation bonuses

The CZK 48.3 billion paid as compensation bonuses to self-employed persons during the Covid pandemic met its purpose of mitigating the impact of the government's measures. But in some cases, people abused the system, an audit by the Supreme Audit Office (NKÚ) shows. The bonuses were paid to people whose activities were banned or restricted by the Czech state between 2020 and 2022 as a result of the pandemic.

The audit covered the Finance Ministry, the General Financial Directorate (GFŘ), and three selected finance offices. Some 2,943,562 applications for compensation bonuses were submitted.

The NKÚ said the availability of the compensation bonus and the fast processing of applications made it easier for applicants to access the money. The NKÚ also found that Czechia distributed the aid relatively quickly compared to other countries.

However, the NKÚ said there is a risk that 1,490 entities started business activities with the sole intention of drawing compensation bonuses. The audit found that CZK 39.2 million in compensation bonuses were paid to these entities in 2020, although they were not entitled to it. For 46 of them, the NKÚ assessed this risk as significant.

"They started their activities between April and August 2020 and reported zero income and zero tax liability in their tax returns for that year. They did not file tax returns for 2019," the NKÚ said. Based on the auditors’ findings, the Czech Financial Administration may subsequently examine the eligibility of these entities for the compensation bonus.

The administrators only assessed whether the recipients were entitled to receive the bonus after it was paid. Out of the total amount paid out, 2.5 percent, or about CZK 1.2 billion, had been verified by July 31, 2022. On the basis of these audits, the Czech Financial Administration demanded the return of CZK 133.2 million and the recipients have returned CZK 114 million to the state budget.

The Czech Financial Administration submitted 162 legal notifications concerning suspected criminal abuse of the bonus system, for a total of CZK 69.3 million. By Aug. 31, 2022, the courts had decided on 18 criminal cases. On the basis of these judgments, the applicants were to return CZK 5.6 million of the paid bonuses.

The NKÚ points out a three-year deadline to investigate the bonuses paid in 2020 will expire this year. After that, it will not be possible to decide that an undeserved bonus should be returned.

Self-employed people who met the established requirements were entitled to the bonus between 2020 and 2022. The daily amount of the bonus ranged from CZK 350 to CZK 1,000, depending on the type of recipient and the period during which the bonus was drawn.