Tax Aspects of Student Work Placements for Companies

Last update: 27 May 2024Published: FinD-INFO Weekly, August 2015, issue 30 / volume VII, http://www.findinfo.si/, Author: Vesna Bartolj Maver

Summary of obligations that a company has when a pupil or student undertakes a compulsory work placement

1. Conclusion of a contract with the school or faculty regarding the provision of a compulsory work placement to the student.
2. Registration of the pupil or student for insurance in case of injury at work using form M12.
3. After registration for insurance, the employer must pay a monthly contribution for insurance against injuries at work and occupational diseases during the work placement period in the amount of 4.63 EUR – the amount applies in 2015.
4. The student may be entitled to a remuneration (depending on internal acts, collective agreements,…). Up to a monthly amount of 303.59 € (from 1.3.2023) the remuneration is non-taxable, above this amount the difference is subject to income tax.
5. From the remuneration received by the pupil or student, it is necessary to pay a health insurance contribution at the rate of 6.36%.
6. Upon payment of the remuneration, it is necessary to submit form REK-1a.
7. The employer is obliged to provide the student with reimbursement of meal expenses during work and travel expenses to and from work (tax-recognised up to the amounts from the Decree)

Summer time is also the time when students fulfil their final obligations arising from received personnel scholarships and/or the study programme that relates to compulsory practical work.

In this context, employers often do not know what the company's obligations are towards pupils or students who undertake a compulsory work placement in the company. Most often (sometimes not even that) they pay the pupil or student the minimum 303.59 €, but not the insurance and contributions.

Below are presented all the employer's obligations towards pupils and students who undertake a compulsory work placement. Also summarised is the explanation from FURS, No. 4250-697/2014-4, dated 18 June 2014, which provides a detailed explanation regarding the calculation and payment of other contributions when paying remuneration for a compulsory work placement.

Compulsory work placement and taxation

According to the Personal Income Tax Act (ZDoh-2), we distinguish between income that is exempt from income tax and income that is not included in the tax base up to a certain amount. Remuneration for compulsory practical work of students, in accordance with the provisions of Article 44 of ZDoh-2 and the Decree on the tax treatment of reimbursement of expenses and other income from employment, is not included in the income tax base up to the amount of 303.59 € per month. In the event that the employer pays remuneration exceeding the amount determined by the Decree, the difference is included in the tax base of income from employment, from which income tax on account is calculated and paid.

The employer is obliged to provide the student, in addition to payment of remuneration, with reimbursement of meal expenses during work and travel expenses to and from work in accordance with the relevant collective agreement at the activity level. Given that the income of a pupil or student from remuneration for a compulsory work placement is considered income from employment under the Personal Income Tax Act, therefore any reimbursements of expenses paid to these persons in connection with work are not included in the tax base under the conditions and up to the amounts determined in the Decree on the tax treatment of reimbursement of expenses and other income from employment.

If a student does not undertake compulsory practical work for a full month during a one-month period, the non-taxable amount is proportionally reduced according to the ratio between the number of days of compulsory practical work performed and the number of working days in the month.

The costs incurred by the employer when paying remuneration for a compulsory work placement also represent a relief in the tax calculation.

In the event that a pupil or student on holiday work is without a training contract (meaning that this is not a compulsory work placement), the basis for payment can be a contract for services (calculation of income tax on account, special tax and lump-sum contribution for accidents at work and occupational diseases) or a referral for work through a student service.

Compulsory work placement and insurance

On the basis of a contract concluded with the school or faculty, the pupil or student must be registered for insurance in case of injury at work (form M12). It rarely happens that the pupil or student is registered for insurance by the school, as it is more correct for the employer to register this person.

Students during practical work are insured persons under point 1 of Article 17 of the Health Care and Health Insurance Act – ZZVZZ. In accordance with Article 55 of ZZVZZ, for these insured persons the contribution for insurance against injuries at work and occupational diseases at the rate of 0.30% of the average gross salary in the Republic of Slovenia for the month of October of the previous year, which in 2015 amounts to 4.63 euros. The contribution is paid regardless of whether the employer has allocated remuneration to the pupil or student in the current month or not.

Article 55.a of ZZVZZ stipulates that insured persons from Article 15 of this Act and family members insured through them from Article 20 of ZZVZZ pay a contribution at the rate of 6.36% also on income from another legal relationship on the basis of which they are not insured under the first paragraph of Article 15 of this Act, received on the basis of work performed or services, when the payment received on the basis of this legal relationship, under the law governing income tax, is considered income and is not exempt from income tax or is not other income under the law governing income tax, with the exception of income from work performed under point 6 of Article 17 of this Act.

The base for contributions under Article 55.a of ZZVZZ is each individual income received, if it is not exempt from income tax or is not other income under the law governing income tax. In the case of payment of remuneration for a compulsory work placement, the income is the remuneration received by the student on the compulsory work placement , whereby the amount included in the base for calculating income tax is the amount exceeding the amount determined by the government, i.e. the amount exceeding 303.59 € of monthly remuneration. According to the opinion of FURS, given the above, there is no explicit legal basis for determining the base for payment of contributions for this income as applies to income tax. This means that the entire income is subject to the health insurance contribution at the rate of 6.36% (summarised position of the Ministry of Health – letter No. 425-1/2014/4, dated 12 June 2014). The Ministry of Health in its position further emphasises that the contribution is paid from remuneration and thus reduces the receipts of students and pupils.

In accordance with the third paragraph of Article 20 of the Pension and Disability Insurance Act – ZPIZ-2, students undertaking a compulsory work placement are insured for disability and death resulting from injury at work. In accordance with Article 4 of the Decision on determining contributions for special cases of insurance, the annual lump-sum amount of 9.54 euros is paid by schools that require or organise the undertaking of a compulsory work placement.

You can read more about this here and here.

Health insurance contribution for pupils and students for compulsory practical work from 1 February 2024 onwards For the purposes of determining the base for calculation and payment of contributions under Article 55.a of ZZVZZ, payment to a pupil or student for undertaking a compulsory work placement is considered income from another legal relationship and when determining the base, the change specified by the amendment ZPIZ-2N (Official Gazette of the Republic of Slovenia, No. 133/23) must be taken into account. For the calculation and payment of health insurance contributions under Article 55.a of ZZVZZ, the rules apply that are described in detail in the document on the FURS website Drugo_pogodbeno_razmerje.docx (live.com) (live.com).

The base for payment of contributions for pupils and students undertaking a compulsory work placement, who are considered insured persons from the first paragraph of Article 55.a of ZZVZZ, is determined in Article 20 of ZPIZ-2N, namely the base for payment of health insurance contributions is each individual payment for work performed or service, received on the basis of another legal relationship, which under the law governing income tax is considered income, including reimbursements of expenses in connection with work performed or service, reduced by standardised costs in the amount of 10% of income.

This means that the entire income received (including reimbursements of expenses and remuneration which, on the basis of the provisions of Article 44 of ZDoh-2, is not included in the tax base of income from employment up to the amount determined by government regulation) reduced by standardised costs in the amount of 10% is included in the base for calculation of contributions. The change applies to payments from 1 February 2024 onwards.

Example: A pupil/student for undertaking a compulsory work placement in April 2024 receives 333.14 euros payment for work and 140.00 euros reimbursement of travel expenses and 120.00 euros reimbursement of meal expenses. The remuneration for the compulsory work placement and reimbursements of expenses are paid under the conditions and up to the amount that, in accordance with Article 44 of ZDoh-2, is not included in the tax base of income from employment. The base for payment of the health insurance contribution in this case amounts to 533.83 euros:

• 333.14€ + 140.00 € +120.00 € = 593.14 €
• Standardised costs at the rate of 10% = 59.31 €

Reimbursement of mentoring expenses

The Public Scholarship, Development, Disability and Maintenance Fund of the Republic of Slovenia, within the framework of public tenders, annually offers employers reimbursement of expenses for mentoring students on compulsory work placements in companies. In 2019, the amount of non-refundable funds amounted to 1,250 EUR for mentoring one student for 800 hours.

Relief for carrying out practical work in vocational education (Corporate Income Tax Act)

Companies can save taxes if they include apprentices, pupils or students in training through a training contract for carrying out practical work in vocational education. The relief is determined according to the payment or remuneration, but up to a maximum of 80 per cent of the average monthly salary in the Republic of Slovenia for each month of training, which is a novelty, as previously 20 per cent applied, but not exceeding the tax base of the tax period. In doing so, it is necessary to exclude expenses for meals, transport or other reimbursements. Source here.

Source: Academia (30. 8. 2023). Fotografije: arhiv Academie.

This English summary was produced automatically from the Slovenian article and is pending editorial review. Slovenska različica