14.12.2020 Salary

[Czech Republic] Recognition of a student tax relief within the monthly salary – high schools


A student tax relief is one of the most frequently used tax relieves. A payroll accountant may recognize it on a monthly basis or retrospectively as part of an annual tax reconciliation. Its great advantage is that a tax non-resident is also entitled to it, which cannot be said of most other relieves or other tax benefits. However, due to its low amount, it does not have a large impact on a final net wage.

A student tax relief (its monthly basis form) is defined in section 35ba, par. 1, letter f) of the Income Tax Act (hereinafter referred to as the “ITA”), according to which an employee who is continuously preparing for the future occupation by studying is entitled to the relief, up to the age of 26, resp. 28, if the employee is studying full-time PhD studies.

Nevertheless, to process payroll and recognize a student tax relief correctly, it is also important to know the State Social Support Act, as it defines in more detail the so-called continuous preparation for the future occupation. Studying at secondary schools (high schools) and universities is considered to be a continuous preparation for the future occupation, with the fact that, according to the law, studying at a higher vocational school is considered to be studying at a secondary school. In order to correctly determine when an employee started studying, we must also look at the Education Act and the Tertiary Education Act, and the rule says that we can apply the relief for a given month only if the employee was a student on the first day of that particular month (section 35ba, par. 3 ITA).

However, the State Social Support Act defines some exceptions, according to which periods other than those defined in the Education Act or the Tertiary Education Act are also a continuous preparation for the future occupation. The payroll accountant must be aware of these exceptions, because often employees seek for increasing their wages through a recognition of a student tax relief even in the months in which the right to the relief does not arise, or in the months in which we cannot yet know whether the right will arise or not. These high school periods include:

  • school holidays period, if a student continues without further interruption in further study, i.e. holiday period between individual school years, if the student continues in study, with the exception of the last year
  • the period from the successful completion of the high school examination, if the examination is held in May or June, to the end of the school teaching period
  • the period of school holidays immediately following the end of studies – however, certain restrictions apply here; if a student graduating from secondary school has not become a university student in the calendar year in which he / she graduated from high school, the period of school holidays after graduation cannot be recognized:
    • in the months when the student was engaged in gainful activity for the entire calendar month, which means e.g. employment (or work on the basis of agreement on the performance of work / agreement on work activities), which establishes participation in sickness insurance (part of social insurance)
    • in the months when the student was entitled to unemployment benefits or retraining benefits for the entire calendar month
    • in the months when the gainful activity and unemployment benefits in the previous two points are directly related to each other and last for the entire calendar month

Examples

A high school student finished the 3rd year of studies in June and started the 4th year in September. A student tax relief can be recognized for July and August.

A high school student finished the 3rd year of studies in June. He was supposed to start the last 4th year from September, but he decided not to finish the school and left his studies. He did not attend any other school since then. A student tax relief can be recognized for the last time in June.

A student successfully passed the school-leaving examination on May 12th. From June 1st to September 30th, he worked on the basis of an agreement on the performance of work with a gross monthly wage of CZK 15,000 (establishing participation in sickness insurance). He did not continue his studies (not even at a university). Without any restrictions, a student tax relief can be recognized for June. From July, however, the student tax relief can no longer be recognized.

A student successfully passed the school-leaving examination on May 12th. From June 1st to September 30th, he worked on the basis of an agreement on the performance of work with a gross monthly wage of CZK 10,000 (not establishing participation in sickness insurance). He did not continue his studies (not even at a university). Without any restrictions, a student tax relief can be recognized for June. The student tax relief also may be recognized for July and August.

A student successfully passed the school-leaving examination on May 12th. From July 2nd to September 30th, he worked on the basis of an agreement on the performance of work with a gross monthly wage of CZK 15,000 (establishing participation in sickness insurance). He did not continue his studies (not even at a university). Without any restrictions, a student tax relief can be recognized for June. The student tax relief can also be recognized for July, as the gainful activity did not last a full calendar month. The relief can no longer be recognized for August.

A student successfully passed the school-leaving examination on May 12th. From June 1st to September 30th, he worked on the basis of an agreement on the performance of work with a gross monthly wage of CZK 15,000 (establishing participation in sickness insurance). On July 15, he was registered as a student of a university. Without any restrictions, a student tax relief can be recognized for June. The student tax relief also may be recognized for July and August.

A student of a higher vocational school is studying in a distance form for the second year. During the school holiday period between the second and third year, he worked on the basis of an agreement on the performance of work with a gross monthly wage of CZK 15,000 (establishing participation in sickness insurance). A student tax relief cannot be recognized at all, because studying at a secondary school (incl. higher vocational school) in a distance form simultaneously with a gainful activity establishing participation in sickness insurance is not considered to be a continuous preparation for the future occupation.

Author:

Martin Svoboda
Payroll Development Specialist
Contract Administration

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