Taxman gives waiters a break

11 August 2011

Waitrons can keep their hard-earned tips for themselves and don’t have to worry about the taxman, the South African Revenue Service (Sars) has confirmed.

Confusion had arisen over whether tips kept by employees were taxable.

This has been dispelled by a ruling made by Sars last week, according to which the transfer of tips handed over to an employer by an employee for “safekeeping” does not constitute a payment of remuneration.

“The Binding Class Ruling recently issued by Sars declared that the transfer of tips (handed over to the employer by the employees for safekeeping in terms of the employer’s proposed Group Tips Policy) from the employer’s bank accounts into the employees’ bank accounts does not constitute a payment of remuneration by the employer,” Gillian Lumb, an employment law director at law firm Cliffe Dekker Hofmeyr, said this week.

“Binding class rulings are intended to promote clarity on the interpretation and application of the tax laws to a class of persons who apply for a ruling in respect of a proposed transaction to which it is a party.”

An employment associate at the firm, Pranisha Maharaj, said the ruling was valid for five years as of August 2010.

She said the proposed Group Tips Policy sought to address the security risk of having employees take receipt of tips during their working hours.

“In terms of the policy, tips are seen as gratuitous payments to which the employees have no entitlement or an expectation of receipt as a part of the performance of their duties,” Maharaj said.

Sapa