New bill to address ‘grey area’ of taxing tips

While waiters at restaurants and cafes in Lithuania receive part of their remuneration in tips, taxing this part of income is a grey area. A new legislative proposal would make tips subject to income tax.

Most waiters in the country receive their tips in cash, which in most cases they keep. One restaurant chain, Čili, has recently introduced the option of tipping by credit card, in which case the sum is included into official accounting and is subject to income tax and welfare contributions.

Donatas Vaitasius, the CEO of Čili, says that tip should be excluded from certain forms of taxation and that there should be more clarity, since in most cases restaurants and their employees pay no levies on tips they receive in cash.

A new bill proposed by MP Šarūnas Gustainis would have tips explicitly subject to tax.

“If the proposed amendments are adopted, this would standardize taxation on all tips,” according to the MP.

According to the proposal, tips would be treated as labour income. It would be exempt from VAT and social insurance, but subject to the income tax. Employers would be in charge of handling the accounting and distributing the sum among their employees.

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