Tips

What is a tip? — A tip is a voluntary payment made by a customer to an employee, usually in the service industry, as a token of appreciation for good service. In Luxembourg, tips are usually given in addition to the standard service charges already included in the bill.

Are tips taxable in Luxembourg? — Yes, tips are considered taxable income in Luxembourg. Employees must declare all tips received as part of their annual income tax return. 

How should tips be reported for payroll purposes? — Tips, whether voluntary or contractual, must be included in an employee's total income and reported to the tax authorities. Even if the tip is paid by someone other than the employer (e.g., a customer), it is still considered taxable compensation. 

How are tips for delivery workers categorized? — Tips received by delivery (e.g., Wedely, Wolt, Uber Eats, Fast Track) workers are treated the same as other tips. These payments are considered wage income and must be reported for tax purposes. 

Do employers need to manage or monitor tips? — Yes, since according to the ACD, tips are part of taxable income, employers are required to withhold tax on this income, even if they are not directly aware of the amount. However, employees are primarily responsible for accurately reporting the tips they receive.

Synonyms: Gratuity, service charge (when included in the bill), bonus, extra