Member Article

The state contribution for commercial rents to entrepreneurs with forcibly closed establishments is gaining more concrete outlines. If an entrepreneur negotiates a 30% discount on rent from his landlord, he will be able to apply for state support in the amount of 50% up to a ceiling of CZK 10 million for the period from April to June. However, the program has yet to be notified to the European Commission before it can be launched.

At its meeting on 18 May 2020, the Government adopted Resolution No. 550, noting the“Program for the Support of Entrepreneurs Affected by the World-wide Spread of COVID-19 Caused by SARS-CoV-19 COVID - RENT”, for which it released an amount of up to 5 CZK billion. The implementation of the program was entrusted to the Ministry of Industry and Trade.

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.

The COVID - RENT state support program is targeted at small and medium-sized enterprises and is capped at CZK 10 million per applicant over a three-month period. Entrepreneurs operating retail establishments (with the exception of, for example, food, pharmacies, drugstores, petrol stations) and service establishments, which had to be closed as a result of a declared state of emergency, will be able to apply for support. They could also receive support if they operated in a limited mode, eg through sales through a dispensing window, a delivery service or an e-shop. However, support will not be available to entrepreneurs who are related to the landlord, whether it is a subsidiary or sister company, but also the connection through the landlord's share in the tenant or the statutory bodies of both entities.

The state contribution should be paid retrospectively, ie the entrepreneur would have to prove payment of 50% of the rent for the supported three months and payment of VAT (if applied to the rent) of 70% of the rent for the period and only then could apply for the state contribution. However, the specific conditions of the program will only be published and may undergo partial changes.

The state contribution under the COVID-RENT program should be provided under the Temporary Framework for State aid measures to support the economy in the current spread of COVID 19 coronavirus disease adopted on 19 March 2020 C (2020) 1863 and its amendment C (2020) 2215 adopted on 3 April 2020. As mentioned above, the aid must be approved by the European Commission in accordance with the Temporary Framework as compatible with the internal market pursuant to Article 107 (3) (a). (b) and Article 108 (3) of the Treaty on the Functioning of the European Commission. It can take several weeks to process the notification. After that, however, it will be necessary to act quickly, as considerable interest is expected from entrepreneurs.

Therefore, it can already be recommended to start negotiations with the landlord to provide a discount.