NGM – Why is the tip not tax-free in practice?

By: Trademagazin Date: 2024. 07. 19. 11:57

In an interview with Radio Kossuth on Friday, Prime Minister Viktor Orbán explained that the government’s intention is to make tips tax-free, as this is currently not the case, the Ministry of National Economy (NGM) told MTI on Friday.

Technical problems and the legal environment today prevent tips from becoming tax-free in practice. If this were to be implemented, it would be a significant help to tourism and hospitality, which are the main sectors of the Hungarian economy, which provide about 10 percent of the GDP and directly or indirectly provide a living for 400,000 people.

According to the announcement, there are currently two fundamental obstacles to the practical implementation of tax-free tips. On the one hand, there is a technical obstacle, because in the case of payment by bank card, the scanning bank terminal (POS terminal) cannot separate the tip from the other amount of the bill and collect it separately for the employees.

On the other hand, there is also a tax regulation obstacle, since if the received tip is subsequently disposed of by the employer and distributed among the employees, then it is not tax-free, but subject to tax and contribution according to the rules on wages, they wrote.