The taxing of tips given to waitstaff at restaurants is extremely complicated in Hungary, writes Napi.hu. Borravaló (literally: “[money] for wine”) has had a separate line on tax returns since 2007. Based on data provided by the tax authority, 3,721 servers reported in their tax returns last year that they received tips from private individuals. The total reported income from tips was a little over Ft 1 billion (€4.3 million), which amounts to Ft 24,500 per person per month. The year before tax returns specifically inquired about this form of income, only 251 servers reported it, which means that only this many were willing to pay the 15% pension contribution. This amounted to Ft 33 million, meaning that reported income from tips was Ft 221 million, a nice sum until you think of all the paperwork and hassle involved.
Enterprises in the catering business have a number of different options for reporting tips and service charges. The simplest way is including a service charge on the bill and not requiring tips, in which case the employer distributes the income from service charges among waitstaff at the end of each month, and this creates a basis for contributions.
Another situation is created if tips are accepted but these are collected by the employer and distributed among servers at the end of each shift. This type of tip cannot be reported, because according to regulations, in this manner, it constitutes part of the wage.
The third version is accepting tips from private individuals. This is the type of tip which tax returns ask about and it creates a basis for contribution for both the employer and the employee. However, the employee has the option of paying a 15% pension insurance instead of the 9.5% pension contribution.
It remains unclear, however, what obligation the employer has when paying contributions. A 29% social security contribution is payable on collected and distributed tips, while 15% is payable on service charges. This pension insurance contribution includes the pension contribution itself. The employer has to pay the same amount on tips received directly from customers, but in that case, the employer also has to pay 9.5% or 15%. All of which may explain why Hungarian waiters always seem to be pretty busy, even if there aren’t any paying customers around…