Tips are taxable
Tips are not always tax-free
For many professional groups - including waiters and hairdressers - tipping is an important source of income that improves the rather low wage. But this little thank you for good service is not always tax-free. For the tax authorities it is crucial who gives the tip and whether it is voluntary.
Voluntary tips are tax-free
2002 was an important year for many employees. Because this year the law on the tax exemption of employee tips came into force. It states that tips are always tax-free if they are "voluntarily given to the employee by third parties on the occasion of a job (...) in addition to the amount that is to be paid for the job." This means: If a customer or guest voluntarily pays a tip as a thank you for good service that exceeds the invoice amount, the money remains tax-free. In such a case, the tax authorities assume that to a certain extent a "personal relationship has developed between the employee and the tipper".
Tips with legal entitlement are taxable
Tipping is a voluntary service. Sense and purpose: It honors good service. As a rule, tips in Germany are ten percent or more. If you are abroad, you should find out beforehand. In the USA, around 20 percent is common, in Asian countries, on the other hand, tipping is rather uncommon.
Tip: If you pay for the delicious dinner or the new haircut with an EC card, you should give the tip to the waiter or hairdresser in cash.
The thing with the tip has a catch: If there is a legal claim to the tip, it is subject to tax and social security in full. These include, for example, operating surcharges in the hospitality industry and meter charges in the furniture transport industry. The peculiarity of these tips is that the amount is usually specified in the employment contract and the employer pays them together with the wages. Accordingly, the money is not only taxable for the employee, the social security contributions are also due.
Tips from the shared tip box
If, for example, there is a common tip fund at the hairdresser's, in a pub or in a doctor's office, tips for employees are tax-free. There is one exception, however: visitors to a casino throw their tips in the form of tokens into a container set up for this purpose - the so-called Tronc.
The Federal Finance Court (BFH), the highest court for tax matters in Germany, has decided that tips in the Tronc are taxable. The BFH justified its decision with the fact that the money flows anonymously into the Tronc, there is no personal relationship between the individual employee and the individual casino visitor. In addition, the employer distributes the money from the Tronc to his employees - for these two reasons, the Tronc tip is also taxable.
By the way:
However, the tip that a casino assistant receives from visitors does not have to be taxed. The BFH decided in summer 2015 (File number VI R 37/14). In the present case, the casino only kept the money and then paid it out to the room assistants.
Toilet dime has to be taxed
Anyone who has already used a public toilet knows the procedure: At the exit of the sanitary facility there is a plate on which the change can be placed - as a thank you for a clean toilet. This change is known colloquially as a toilet egg.
What many do not know, however, is that the toilet penny, which many toilet-goers wrongly assume, is intended solely for the toilet man or woman, goes to the leaseholder of the sanitary facility. This then pays his employees, among other things, with this money. The toilet staff get the tip together with their salary. Therefore, the toilet dime is subject to tax and social security and is not a tax-free tip.
This is an editorial text from the VLH editorial team. There is no advice on topics that are outside the tax advisory powers of an income tax aid association. Consulting services in specific individual cases can only be provided within the framework of the establishment of a membership and exclusively within the advisory authority according to § 4 No. 11 StBerG.
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