Employee/contractor’s obligation to account for tips
More and more catering companies are looking for modern and simple ways to make it easier for customers to reward service, while also streamlining tax returns related to tips. One such solution is the introduction of a mobile app that allows tips to be given in a cashless form.
On 24 December 2024, the Director of the National Tax Information issued an individual interpretation (ref. 0113-KDIPT2-3.4011.638.2024.2.JŚ), in which he deemed the company’s position correct. The interpretation discusses the tax consequences of providing tips in a non-cash form via a mobile application managed by an external company. Below are the key findings from the interpretation:
Tipping and employment income
The non-cash tips provided by customers through the mobile app, which go directly to the accounts of the employees (and not to the company as employer), do not constitute employment relationship income. The company does not participate in the distribution of these tips or exercise control over them, which precludes their classification as employee remuneration.
Tips and mandate contracts
In the case of persons employed under contracts of mandate, tips are also not considered as income from personally carried out activities within the meaning of Article 13(8)(a) of the PIT Act. The key point is that the company, as the principal, does not control the tip funds or participate in their distribution. The classification of tips depends on the manner in which they are transferred – whether this is done through the principal or without the principal’s involvement.
Accordingly, the company, in the case of both employees and contractors, is not required to calculate, collect or withhold advance income tax on such tips. The company also does not have to show these tips on its payroll or include them in its PIT-11 return.
Classification of tips as income from other sources
Tips given directly by customers to staff, which do not go to the employer/principal, are treated as income from other sources under Article 20(1) of the PIT Act.