Tipping is tax-free if customers voluntarily give a small gift of money to the employees of a service provider. You pay this tip in addition to the invoice amount. It relates to the work done and is a sign of appreciation and thanks from the customer. There is no contractual entitlement to such a tip and it is handed over personally.
What are the exceptions? – Service fees and no personal relationship
For tip to be a tax-free portion of income for employees, it must come from a personal relationship. The waiter who served the table gets a tip in addition to the bill. In a hairdressing salon, a customer puts the change in the coffee till, which the employees share in the evening. One thing is clear: the money is for the team, not for the company.
However, if specific flat-rate service charges or the like have been contractually agreed and are, for example, on the hotel bill, on the menu or the like, then these service money is taxable. There is now a legal claim to these flat-rate service charges or service fees.
- The content of the so-called Tronc in casinos also contains taxable tips. The guests throw tokens into the tronc, which they give the team as tips. However, since this is impersonal, the content is part of the employees’ taxable wages. The Federal Finance Court (BFH) decided that in 2008.
- Also tax is tip , which itself presents the boss his employees. The tax office regards this as a voluntary special payment and therefore counts as taxable income. Using the sales tax calculator is important.
Tips: Tax-free for the self-employed?
With a few exceptions, tips are often tax-free for employees. If, on the other hand, a self-employed person receives a tip , things are different. The taxi operator who drives his own taxi or the pub owner who serves himself must pay tax on the tips received as part of the turnover. This means that sales tax is deducted and that the tip also counts towards taxable income.
How is tips taxed?
Entrepreneurs can receive tips, but also spend them. Depending on the situation, you have to consider the respective tax treatment.
What applies to tips received?
Tips received are not tax-free for entrepreneurs. You have to pay tax on the bonus in two ways. Because your tip includes sales tax and you also have to pay income tax for it.
Sales tax in tips
Basically, tips that are paid to entrepreneurs are part of the operating income that also includes sales tax. Therefore, entrepreneurs who receive tips from their customers for their services must record and post them in their accounting. The tip is to be added to the assessment base for sales tax. As a result, sales tax must be deducted from every tip payment and paid to the tax office.
Income tax for tips
Also with regard to income tax, tips received for entrepreneurs are not tax-free. Because they have to add tips that they receive from their customers to their earnings. The tip increases the operating income and thus also the tax liability.