Tips are more than just a nice gesture – they play a crucial role for service staff in the catering industry. Among other things, tips help to top up salaries and serve as an instrument of appreciation. However, it is important to know that tips can also have tax consequences. In this article, we explain which tips have to be taxed and which exceptions apply.
Voluntary tip is always tax-free
An important principle is that voluntary tips given directly by a customer to a specific employee are tax-free in any amount. This applies because it is regarded as a personal acknowledgement of the service and there is no legal entitlement to it.
Tips with legal claim
The situation is different for tips with a legal entitlement, such as service charges. These are deducted from the gross wage and are therefore subject to tax and social security contributions. It is important to record these tips correctly and include them in payroll accounting.
Self-employed persons and entrepreneurs
Self-employed persons and entrepreneurs must pay tax on their tips. Not only must income tax be taken into account here, but also VAT. Careful bookkeeping is therefore essential when recording and accounting for tips.
Collective tips
Tips that are collected in a common pot and distributed by the employer to all employees are subject to tax. In this case, there is no personal connection to the tipper, and it is seen as an expression of satisfaction with the quality of service provided to the entire workforce.
The taxation of tips in the catering industry requires a precise understanding of the different types of tips and their tax treatment. Clear record keeping and compliance with legal requirements are therefore crucial. We hope we have been able to shed some light on the subject with our article.
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