Czech restaurant tips tax-free from January: what workers should know

From 1 January, a new exemption for restaurant tips takes effect in Czechia: they will not be subject to income tax or to social and health insurance contributions. The change is part of a package linked to the return of EET, the electronic registration of sales. Details were given by Lukáš Urban, commercial director of Piano Group, on the Agenda SZ Byznys podcast.

Higher pay, but not a higher pension

Kitchen and floor staff will receive a higher “net” payout, and venues will get a tool for keeping people in an industry where staff are hard to find. But there is a flip side. “If tips are not subject to insurance contributions, that amount will count neither toward the pension nor toward the calculation of holiday pay,” Urban warns.

An employee who sees higher income on their payslip will get no increase in their future pension. On the other hand, the earnings can be proven when applying for a mortgage, although whether banks accept them depends on each bank’s practice. The exemption is not unlimited: the law caps it at seven percent of the venue’s monthly revenue from catering services.

Not for everyone

Not everyone will be able to use it. Urban gives the example of the owner of a small village restaurant who operates under their own IČO and serves guests personally: such tips remain ordinary income, because there is no employer–employee relationship with oneself. Questions will also arise over how tips are split: today some restaurants share them with people who neither cook nor serve guests. Now they will have to distinguish who can be paid with the exemption and who with tax.

According to Piano Group’s data from tills and payment systems, tips in Czechia are rising: when paying through a QR app, the average is about seven percent of the bill. Prague tips noticeably more than the regions, though the capital is influenced by tourists and their habit of giving more.

EET is coming back: what changes for restaurants

For venues, the return of EET means above all preparing their till systems. Piano Group supplies tills to about four thousand clients; most will need only an update, while part of the market will have to buy new equipment. “I have a feeling that the market greatly underestimates the approaching deadline,” says Urban. Deadlines were pushed back before, but this time he does not expect a delay.

In some ways the rules are simpler than the old EET: there is no need to issue receipts or display a notice about sales registration. Much depends on whether payment is cashless. A card payment made right in the restaurant is registered, as is a QR code if the guest pays at the till.

“This creates problems with corporate events: if a company books a Christmas party and pays an advance in cash, it has to be registered. The restaurant invoices the balance, the company pays it from its bank account 14 days later, and that amount does not need to be registered. That seems illogical to me,” says Urban. But revenue that does not have to be entered into EET does not disappear from the books or the tax return: the state learns of it, for example, through control reporting.

The cheapest till costs a few thousand crowns: any tablet with the app installed will do. The state does not require expensive certified equipment. Being unprepared may cost more.

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Around Prague, based on reporting by seznamzpravy.cz