Are Tips Taxable in Ireland? Understanding the Tax Rules for Tipping
Is tipping common in your line of work?
There is no law that stops employers from keeping tips and you may have heard of stories of workers being exploited by employers when it comes to tipping.
Here’s what you need to know about tipping and taxes.
So, the big question is: Are my tips taxable?
Whether or not tips are taxable depends on where you are working. Some countries have taxes on tips received, others do not. Here we will discuss how tips are taxed in Ireland.
In Ireland, there are many professions in which tipping is common practice, especially in the hospitality industry. Taxi drivers, waiting staff, delivery drivers and hairdressers are just some of the industries in Ireland where tipping is common.
While tips are a great bonus and a real sense of generosity, the reality is that any extra income earned outside of your PAYE must be declared.
Ultimately it is an individual’s responsibility to pay tax owing on tips.
It is important to note that if you do receive cash tips throughout the year, that you keep a record and declare them, all of which Taxback's team of tax experts can complete for you.
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What counts as a tip?
Essentially, there are a variety of definitions of what a tip can be. It can be cash you receive at the end of a shift or from a customer, or pooled amount of cash divided and shared among all staff.
In some jobs, tips may form part of your pay package, but in others, tips are off the books.
Laws on tipping in Ireland
Unlike the UK and the US, tipping in Ireland is a big mish-mash of different rules set in place by the individual establishments – in other words – it’s not regulated.
Ideally, like in the UK, tips would be pooled and divided equally amongst the staff and a ‘troncmaster’ takes charge of making sure this income is taxed correctly. This would be a fair and reliable system and the tips would then be taxed accordingly through payroll.
How Irish tips are taxed
Instead, cash tips are usually divided up amongst the staff and it is their responsibility to make sure they pay tax on their tips. In the case of card payments or service charges, this income is taxed through payroll by the employer.
If you earn any extra income outside of your PAYE income in Ireland you must declare it, so if you’ve received cash tips throughout the year, you must keep a record and declare it on a Form 12. Employees in Ireland are exempt from paying VAT on tips. This income is taxed through payroll by your employer.
There is not much of a definitive law when it comes to our tipping system, workers are not protected by any legislation meaning their employers can keep their tips if they like. This is because the ownership of tips is not written into any legislation here, meaning employers can keep the tips if they please.
This can go either way as some restaurateurs give their staff tips “off the books”. This works mainly for cash tips because when you tip via card transaction, the bank and Revenue take a cut automatically.
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Lack of clarity on tipping in Ireland
All in all, it's safe to say the topic of tips in Ireland can be a confusing one for many employees, with a lot of workers unaware of their rights.
Even a simple Google search can often leave those interested scratching their heads.
If you have any questions about filing your taxes or claiming your tax back in Ireland, don’t hesitate to contact the Taxback team.
The average Irish tax refund is €1,880
Why Taxback?
Taxback is the easiest way to manage your Irish taxes.
When you use our service, you will be guaranteed:
- No complicated forms – simple online process
- Your maximum tax refund sent to your bank account
- Our Live Chat team are available 24/7 to answer any of your tax related questions
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