What will be exempt?
The exemption covers voluntary tips received by an employee within an employment relationship directly in connection with providing a catering service. The payment must come from the customer and relate to premises where food is consumed on site — typically restaurants, cafés and bars.
Under the Trade Licensing Act, this means “premises in which a trade is carried on” involving preparing and selling meals for direct consumption at those premises. The exemption does not cover refreshment stalls, food trucks or marketplaces.
Up to what amount?
The limit is set at 7% of the employer's monthly sales from catering services. Up to this amount, tips are exempt from personal income tax and social-security and health-insurance contributions. Anything above the limit is taxed in the usual way.
The employer determines how tips are distributed among individual employees under its own rules. If an employee receives tips from multiple employers simultaneously, the limit is assessed separately for each employer.
TIP! The exemption applies only to employees receiving wages — waiters, waitresses, bartenders and similar positions within an employment relationship. If you run a hospitality business as a self-employed person and receive tips through your own business, you do not qualify.
From when?
The exemption forms part of the same law as the new EET 2.0, so it shares its legislative fate: it awaits final approval and the President's signature. If everything goes to plan, it should take effect on 1 January 2027.
To conclude
If you run a restaurant, café or bar and employ people in roles where tips are a normal part of income, this change will directly affect you — both your payroll and how you distribute and record tips. It is worth thinking about it in advance, rather than waiting until employees start pressing you next year. ☺
Would you like to discuss how the tips exemption will affect your business's payroll? Get in touch. 🌿