The law on the taxation of tips passed by the Parliament (effective from January 1, 2023) states that tips are taxed at a rate of 10%. But it is strictly about amounts from 0 to 15%. This is still a question that has some technical implications, especially for the employer: what if the customer is more generous and wants to leave more money, say 20%, and uses a bank card?

We talk about a bank card because there will be situations where the cash may not enter the payment account, so there will be tax-free money, as was the case in 2022. Let’s not forget that now there are also sanctions on this law, so this untaxed money will effectively be black money.

HotNews.ro spoke with Cornel Grama, a tax consultant.

In principle, the law says this (Law 376/2022):

“Entities of business provided for in paragraphs (1) must provide the customer with a payment receipt before issuing a tax receipt, which contains sections for the customer to choose the level of the proposed tip from 0% to 15% of the consumption value. The payment statement must also contain another column in which the customer can enter the amount offered as a tip, in absolute value, if he chooses this method of determining the value of the tip provided “

In other words, says Grama, I have the option of giving a percentage between 0 and 15% by filling it in the payment note before issuing the tax receipt, or writing the amount in absolute value (not as a percentage) with the tip amount.

“It can obviously exceed 15%, because the legislator does not see to limit me,” says the tax consultant.

He says that in this situation where a larger tip is left over, the bar or restaurant has two options:

1. Include the remaining amount as income from employee wages, in which case income tax, health and pension contributions are paid.

2. Be involved in the company but pay other taxes on them such as VAT (plus other taxes payable later such as income/gains tax – as the case may be).

So the fact that politicians haven’t thought about such things can lead to problems from a fiscal point of view for companies. The decision will obviously be up to the employers.

Who asked for a tip tax regulation

For those who don’t know, this law started with some Horeca entrepreneurs a few years ago.

More precisely, in August 2019, a press conference was held, which, in addition to some patrons, was attended by Yevhen Teodorovych, then Minister of Finance and Senator, as well as Mirela Kelugarianu (then head of ANAF). On the business side, there were Dragos Anastasiu and Dragos Petrescu from RBL, who then represented the Coalition for the Development of Romania.

Dragos Petrescu said: “This measure will increase the incomes of workers in the hospitality sector and will practically determine the stabilization of the labor force in this sector in Romania. You all know how important it is today to keep our people, to keep our workers in Romania, and this measure will help us.

I found an open door at the Ministry of Finance. He has received our requests, and I am convinced that we will achieve peace.”

Yevhen Teodorovych was open to the idea of ​​the business environment present at the meeting: “On our part, as the Ministry of Finance, we are obliged to listen to the business environment and every time it comes with a proposal, to fulfill them. This is a discussion that has been going on for some time.”

Dragos Anastasiou clarified: “We have to talk about income transparency, which is an important thing. This is an important thing that leads to the avoidance of tax evasion.”

See the entire VIDEO below, shot at that time by colleagues from StartupCafe.ro

Later, the Ministry of Finance made a draft (very quickly) and put it out for public discussion. For those who do not remember, see the text written in 2019 regarding the draft ordinance on the taxation of tips (link).

Later, Teodorovychi took it and turned it into a legislative initiative. At the end of 2022, taxation on tips was adopted.

Photo source: Dreamstime.com