1. When are tips (Trinkgelder) tax-exempt?
According to § 3 No. 51 EStG, tips are exempt from income tax if the following conditions are met:
| Condition | Explanation |
|---|---|
| Paid voluntarily | Directly from the customer, of their own free will |
| Paid to the employee (not to the boss) | The tip goes to the worker/service provider personally |
| Not agreed in advance | Not included in the invoice or contract |
| Not linked to a specific service obligation | Not contractually tied to a particular performance |
If a tip is received directly from the customer and does not appear on the invoice, it is generally tax-exempt for employees.
Sector-specific situations
| Situation | Tax treatment |
|---|---|
| Customer leaves cash on the table | Tax-exempt if it goes directly to the waiter or service staff |
| Tip is shown on the invoice and paid by card | Must be entered in the cash register – counted as turnover (Umsatz) |
| Manager collects tips in a pool (Trinkgeldpool) and distributes them | Depends on how it is handled – if distributed officially via payroll, it is usually subject to wage tax (lohnsteuerpflichtig) |
Direct tip to the hairdresser: Tax-exempt for employees under § 3 No. 51 EStG, if conditions (voluntary, direct, not agreed) are fulfilled.
Tip shown on the invoice: Considered part of turnover and must be taxed accordingly.
Stuhlmiete model (chair rental):
The tip normally goes directly to the self-employed hairdresser.
As a self-employed person, they generally have to declare these tips as part of their business income, since the legal exemption mainly targets employees.
Cash tips: Not shown on the invoice – treated as tax-exempt tips for employees.
Tips paid by card: Included in the invoiced total – treated as turnover and subject to VAT (Umsatzsteuer).
Taxi operators are often expected to keep a rough record or estimate of average daily tips, especially for the tax return (Steuererklärung).
| Situation | Tax effect |
|---|---|
| Cash tip for the driver | Tax-exempt for the employee; not part of the company’s turnover |
| Digital tip (e.g. via an app such as Lieferando) | Counted as income for the driver and appears on their income statement – generally taxable |
Examples: mobile hairdressers, private tutors, technicians, self-employed service providers.
Cash tip from the customer:
Must generally be reported as part of business income in the profit calculation.
There is no explicit tax exemption comparable to the employee rule; § 3 No. 51 EStG primarily targets employees.
Warning – legal risks
| Situation | Legal risk |
|---|---|
| Tip is recorded in the cash register but not taxed correctly | May be considered tax evasion if the treatment is not clear and proper |
| Tips are distributed officially together with salary | Must be treated as taxable wages (subject to wage tax and social security) |
| Tip is paid by card but withheld by the employer | May constitute a legal violation (failing to pass on the tip to the worker) |
Which records should be kept?
| Document | Purpose |
|---|---|
| Statements from the accounting/payment system on card payments | To distinguish between true tips and normal turnover |
| Daily notes or estimates from drivers or service staff | To support the claimed treatment for tax purposes |
| Records of the tip pool (Trinkgeldpool) | To determine the correct tax treatment (wages vs. tips, distribution method, etc.) |
Practical summary
| Worker / activity | Cash tip | Tip via card |
|---|---|---|
| Waiter / employed hairdresser | Tax-exempt if paid directly by the customer | Taxable if shown on the invoice / processed through the cash system |
| Self-employed taxi driver | Part of business income; in practice often estimated as tips | Counted as turnover, subject to VAT |
| Freelancer | Part of professional income | Must always be declared as income |
| Restaurant owner | No exemption if it goes into the business cash register | Counts as turnover and is subject to VAT and income/corporation tax |
The editorial team of this website strives to provide accurate information based on thorough research and multiple sources. Nevertheless, errors may occur or some details may not yet be fully verified. Therefore, the information in these articles should be regarded as an initial, non-binding point of reference. For definitive and legally reliable advice, you should always contact the competent authorities or a qualified tax adviser.
