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Are tips taxable in South Africa?

Yes, tips are taxable if they are considered to be part of your gross income and must be declared to SARS.

Every time a diner adds a tip to the bill, this income is almost certainly taxable.

While there are a number of definitions around the employer /employee / patron relationship, the interpretation given is that income earned in the course of your job should be declared as taxable earnings.

Of course, monitoring hand overs of cash is almost impossible....

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Two case studies direct from the SARS Interpretation Note: No 76

Example 1 – Gross income 

Facts: 
A, aged 19, works as a porter for the Sparkling Waters Hotel Group in Port Elizabeth. 
A is required to assist hotel guests by collecting their luggage on arrival and carrying it to their designated hotel room. A is also required to collect their luggage and transfer it to their vehicle upon departure from the hotel.
 For the 2013 year of assessment A received a gross salary of R42 000. In addition, A received tips 
amounting to R15 010 from guests for services rendered. 
Result: 
A must declare all income received or accrued for services rendered in the annual tax return, that is, A must include the salary income and the tips received from hotel guests. 
It is important to note that A is not relieved of the requirement to declare both sources of income in circumstances where A may ultimately not pay tax (for example, where the taxable income is below the annual threshold). 

Example 3 – Gross income

 Facts: M, aged 20, is a student who earns money by working as a barman in one of the private suites at ABC Stadium operated by the XYZ Rugby Union. During June 2012, M received cash tips of R5 800 for services rendered. In addition, the suite lessee gave M two season tickets to the value of R2 000 as a tip in recognition of the excellent manner in which M took care of the lessee’s guests.  
Result:
 M has received gross income in accordance with paragraph (c) of the definition of the term “gross income”. M’s income tax return must include the cash tips (R5 800) and the monetary value of the two season tickets (R2 000). 


Links, Notes and References

SARS Website
Accsys (Pty) Ltd



Note

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