During the submission, when the user changes collections, a PATCH request is sent to the specific workspace item's endpoint to make sure the item is updated accordingly. The PATCH looks something like this:
As far as I can tell, the backend simply applies this patch like it would for any other change. Meaning, the only thing that changes is exactly what's in the patch: the collection field of the workspace item.
If the new collection has an item template, it doesn't look like the metadata fields specified in it are added to the workspace item.
It also doesn't look like a trivial thing to do, because you'd either have to throw away any metadata you already have and start from the template item, or perhaps merge them with the current workspace item in some way.