Tips under taxman’s scrutiny
Gov’t considering tax-free ceiling for gratuities and to prevent bosses from withholding them
The government is working on a plan about the tax treatment of tips, in collaboration with the Independent Authority for Public Revenue (AADE).
Although tips have been taxed by law since the 1980s, no one has ever bothered to do so. Apparently this was impossible, as tips were in cash and not by card, like today. It was – and continues to be – a way of increasing the incomes of wait staff and others in similar services.
Every proposal submitted has positives and negatives. It would be easy, for example, to say that tips are tax-free, but such a move would create a chain reaction, affecting labor relations. The same sources argue that this would encourage employers to pay their workers the basic salary only, making up for the rest in tips.
In fact, all tips cannot have the same tax treatment: There is the tip for the delivery of a pizza or kebab amounting, on average, to 1 euro and there is also the incredibly generous tips found on popular islands like Mykonos, which may reach €30,000. According to auditors, in most cases such large tips are usually in cash, but this year for the first time payment via cards was also detected.
Therefore, card tips are taxable, as the legislation in place for decades provides for. The question is whether the employees receive the tips or whether the company withholds them. There are cases where tip and bill are one and are withheld by the business. That is why employees often ask for the tip to be given in cash.
Where there is a different button for tips, they are usually credited as normal. Every month the company proceeds with the withholding of the payroll tax and they give it to the employees. Social security contributions are also calculated on the amount in a presumptive way.
The government is working on various scenarios to deal with the problem. It is therefore considering to exempt small tips from taxation, setting a ceiling for tax-free gratuity. There may also be a penalty for enterprises that withhold tips paid by card. There will also be cross-checking by auditors to established whether companies have withheld tips.
