Czech Court Ruling and Employers’ Social Security
In the Czech Republic, the Regional Court in Ústí nad Labem issued a ruling1 recently regarding the refund of over-payments of social security for the first half of 2007. This development has been extensively discussed in the Czech media.
In this newsletter, we highlight a number of points concerning the possibility of claiming a refund of employers’ social security for this period.
The ruling of the Regional Court dealt with the case of an employer that did not pay employer social security for the period from 1 January to 30 June 2007, since the definition of the assessment base for social security premiums paid by the employer was missing from the Social Security Insurance Act. When the government realized the omission, a decree defining the assessment base was issued; although the Act was not officially amended until 1 July 2007.
The Regional Court cancelled the decision of the Social Security Authority which had assessed the unpaid insurance, since the action taken to assess was based on a government decree and not a law, as is required by the constitution.
The ruling appears to give scope to employers to claim a refund of employers’ social security for the relevant period.
To claim a refund, a written application must be filed with the Social Security Authority. At the same time, the employer must amend the summaries of insurance payments previously filed. Czech Republic legislation states that a refund can be claimed within five years of the end of the calendar year in which the over-payment arose.
Given the potential burden on the state budget – which has been estimated at CZK 100 billion – there’s a possibility that an attempt will be made to shorten the deadline. This would require, however, an amendment of the Social Security Insurance Act. Therefore, if an employer decides to seek a refund, it should be claimed with minimal delay.
The Social Security Authority has already appealed against the ruling to the Supreme Administrative Court. The judgment of the Supreme Administrative Court can be expected to be issued during 2010; no refunds are likely to be made before then.