3.02.2021 Taxes

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


In the article from December 14th, 2020, we discussed the conditions under which a student tax relief, resp. child tax benefits can be recognized in the case of high school studies. Now we focus on college and university studies. The introduction does not need to be repeated. If necessary, it is possible to look at the previous article.

Link to the article from Dec 14, 2020 here.

According to the State Social Support Act, a continuous preparation for the future occupation begins on the day when the child becomes a university student and ends on the day when the child finishes his/her university studies. Basically, this definition does not tell us anything, so the payroll accountant has to look into the Tertiary Education Act to find out what the dates really are. This Act states that the applicant becomes a student on the day of enrollment in the study. On the contrary, the study is terminated on the day when the state final examination was taken, if the study was completed properly. The study can be completed in many other ways. E.g. school dropout. In such a case, the study ends on the day on which the declaration of the dropout was delivered to the university.

As in the case of secondary schools, the State Social Support Act defines further periods in which the child is considered a student (continuous preparation). These university periods include:

  • the period from the end of high school studies to the day when the child became a university student (without interruption in further studies)
  • a calendar month in which the child has properly finished university
  • the calendar month following the calendar month in which the child had properly finished university, unless the child was engaged in gainful activity for the entire calendar month or is entitled to unemployment benefits or retraining benefits for the entire calendar month
  • the period from the end of studies at a university to the day when the child became a student of the same or another university, if the study at the same or another university immediately follows the studies from the previous university, but no longer than three calendar months following the calendar month, in which the child ended studies from the previous university
  • the period of interruption of studies at a university, during which maternity or parental leave would otherwise last

At the same time, the question arises as to whether a period of 3 calendar months after the end of studies at one university can be considered as continuous preparation even if further studies are continued after a period longer than 3 months. Thus, whether 3 months alone (as the maximum number of months) can be considered as continuous preparation in any follow-up, or only if a student continues his/her studies within these 3 months. There are many interpretations on this issue. Ministry of Labor and Social Affairs stated that 3 months are part of the condition of the immediate follow-up, i.e. that if the period between studies exceeds 3 months, it is no longer a immediate follow-up and the whole period between studies (including the first 3 months) cannot be included in exceptions and cannot be considered as a continuous preparation for the future occupation.

Examples

The high school student successfully passed the school-leaving examination on May 12th. From May 1st to December 31st, 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 September 1st, he became a university student. Without any restrictions, a student tax relief can be recognized from May to September (and on).

The student successfully passed the state final exam at the university on June 25th. He did not continue his studies. In June and July, 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). Without any restrictions, a student tax relief can be recognized for June. From July not anymore.

The student successfully passed the state final exam at the university on June 25th. He did not continue his studies. In June and July, 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). Without any restrictions, a student tax relief can be recognized for June. The student tax relief also may be recognized for July. From August not anymore.

The student successfully passed the state final exam at the university on June 25th. From October 1st, he continued his studies at another university. From June 1st to October 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). Without any restrictions, a student tax relief can be recognized for June. As the time between studies did not exceed 3 calendar months, the student tax relief also may be recognized for July, August and September.

A declaration of the dropout was delivered to the university on June 25th. From October 1st, the student started a brand-new study at another university. From June 1st to October 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). Because he was still a student on June 1st, a student tax relief can be recognized for June without any restrictions. As the time between studies did not exceed 3 calendar months, the student tax relief also may be recognized for July, August and September.

A declaration of the dropout was delivered to the university on February 2nd. From October 1st, the student started a brand-new study at another university. From February 1st to October 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). Because he was still a student on February 1st, a student tax relief can be recognized for February without any restrictions. As the time between studies has exceeded 3 calendar months, the new student tax relief can be recognized from October at the earliest.

Note: Similar rules apply to the child tax benefit. The fundamental difference is that the child tax benefit can be recognized already in the month in which the child begins to continuously prepare for the future occupation. This does not apply to a student tax relief. If the child becomes a student on September 2nd, a student tax relief cannot be recognized for September (we can start applying the relief since October), but the child tax benefit for September can already be recognized.

Author:

Martin Svoboda
Payroll Development Specialist
Contract Administration

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