Whose money is the tip?

Finland is not a tipping country, and then again it is. Card terminals ask the question on every payment now, customers answer it more often than they used to, and a café that saw a few coins in a jar five years ago now sees a line of tips on every card settlement. The money arrives in the business’s bank account, mixed in with the takings, and it belongs to somebody else.

That last part is what the books have to show. The tax rules on tips are older and clearer than most owners expect, and they answer three questions in turn: whose income it is, what the employer has to do when it passes through the business, and whether VAT reaches it.

Two kinds of tip, and one that is not a tip

The rules sort payments by one test: did the customer choose to pay it? Verohallinto’s VAT guide describes the tip as money whose amount “is not agreed in advance and whose giving is voluntary” (in our translation).¹ That covers the coins on the table and the amount a customer types into the terminal.

It does not cover a service charge the restaurant adds to every bill, or a fixed cloakroom fee on the wall by the door. The customer does not choose those. They are part of the price, and they are treated as the price, which is the last section of this piece. Everything before it is about the voluntary kind.

Cash in the hand: the waiter’s income, nobody withholds

A tip is taxable income of the person who receives it. What makes it unusual is how the tax is collected. The Prepayment Decree lists income from tips among the income from “other income-producing activity” (in our translation), which is collected by prepayment rather than by withholding.³ Verohallinto’s guidance on tax cards repeats the same list.³ In plain terms: the customer does not withhold tax from a tip, and nobody else does it for them.

So the tax on cash tips is the employee’s own business. The pre-completed tax return is built from what employers, pension institutions and banks report, and it is the taxpayer’s job to add what is missing.⁸ Cash handed over the table is missing unless somebody reported it. An employee who receives tips regularly can also ask for a prepayment (ennakkovero) in MyTax so that the tax is paid during the year and does not arrive as one bill after it.

On the card: through your account, still not your money

A card tip takes a longer route. The customer pays the bill and the tip in one transaction, the acquirer settles both into the business’s account, and the business passes the tip on to the staff, usually with the next wages. It looks like pay because the employer is the one paying it. For tax, it is still the customer’s tip.

The Incomes Register guidance, in the version valid from 1.1.2026, says exactly what the employer does. If the tip is based on work done in an employment relationship, the employer reports it with the income type Total wages (101) or, for example, Other compensation (216). And then: “The employer does not need to withhold tax from the income, because the income is subject to pre-assessment. However, the employer must pay the employer’s social insurance contributions.”²

Worth knowing: Verohallinto’s general guidance on withholding, in its version for 2026, does not mention tips at all.⁹ The rule lives in the Incomes Register guidance and in the Prepayment Decree, so a payroll setup that treats card tips as ordinary wages with tax withheld may never notice the difference.

The tip passes through your bank account. It never passes through your turnover.

Not your sale, so not your VAT

The VAT guide states the principle in a sentence: when a tip is not based on an agreement and is not consideration for goods or services sold, it is “an item outside the scope of VAT”. It goes on: the tip is not included in the tax base of sales and no VAT is paid on it “if the tip is paid directly to the staff or to a member of it.” (Both in our translation.)¹

Read the second sentence carefully. It names tips paid straight to staff. A card tip is paid to the business and passed on. The principle in the first sentence points the same way for it, since the customer still chose to pay it and bought nothing with it, and the Incomes Register guidance treats it as the employee’s income from the customer. But the current VAT guide does not spell out the card case. If the whole tip goes to staff, we see no reading of the guidance that puts VAT on it. If any part of it stays with the business, see below and ask.

The Accounting Act points the same way from the other side. Turnover is the income “from the sale of goods and services”, net of discounts and VAT (in our translation).⁷ A tip is not the sale of anything. It is money held for staff.

In the books: a liability, not a sale

The card settlement is the one bank line that mixes the two. Split it on the way in: the sales go to sales, at their rates; the tips go to a liability account, owed to staff; and the liability comes back to zero when the tips are paid out. Your till should already show the tips as their own line, apart from the sales on the Z report; if it does not, that is the first thing to fix.

The shortcut is to book the whole 2 580,00 EUR as sales. That evening it adds 158,59 EUR to turnover that was never sold and 21,41 EUR of VAT that was never due. Over a month of 3 600,00 EUR in tips it is 428,19 EUR of VAT paid on money that belonged to the staff, and more than 5 000 EUR a year. The payout then goes through as wages, so income tax roughly nets out, which is exactly why the mistake survives: nothing in the profit looks wrong, and the VAT return is quietly too high every month.

If the business keeps the tips

Some businesses keep card tips, or a share of them, for “the house”. Once the business keeps the money, it is the business’s income for income tax, like anything else it receives in the course of trade. Whether VAT then reaches it, the current guidance does not say: its explicit sentence covers tips paid to staff, and nothing we found addresses a voluntary tip the business keeps for itself. Do not decide that at the till. Decide it with your accountant, and tell your customers where their tip goes.

For history: Verohallinto’s 2007 guidance on service charges said in so many words that voluntary tips passed on to staff “are not the company’s sales” and are not booked as its income (our translation).¹⁰ That guidance is no longer published on vero.fi and is marked an old version where it survives, so we quote it as the reasoning behind today’s rules, not as a rule of its own.

A compulsory service charge is price

Everything changes when the customer has no choice. The VAT guide: “When a business charges a service fee to the customer regardless of the customer’s will, the business must pay VAT on the service fee” (in our translation).¹

The Supreme Administrative Court drew the income tax consequence in KHO 2007:60. A restaurant’s cloakroom staff were paid through a fee whose amount the restaurant had set in advance and posted by the door. The court held the fee was payment for a service the restaurant sold, taxable business income of the restaurant, with VAT due on it; that the staff’s pay had been agreed to consist of those fees made no difference.⁶ So a compulsory service charge goes into turnover and VAT like the rest of the bill, and whatever of it reaches the staff is ordinary wages, with withholding and every contribution. Which rate applies to a service charge on a bill that has both food and drink on it, the guidance does not say. Ask before you print it.

Five checks for your tips

• Card tips reach the books as a liability to staff, not as sales.Split the settlement using the till’s own tip line.
• The liability account is back to zero after each payout, or the balance is explained.What is left is money the business owes its staff.
• Tips paid out are on the Incomes Register report as 101 or 216, and the health insurance contribution is paid on them.Withholding is not required. Contributions are.
• No VAT is reported on tips that go to staff in full.If the business keeps a share, ask your accountant before the next VAT return.
• Staff know that cash tips are their income and how to report them.The employer has a stake too: the law says tips are to be reported to it.

What this means for software

A tip is recorded once, at the terminal, and every later mistake is a failure to carry that one fact forward. The till knows which part of a payment was the bill and which part was the tip. If it hands the settlement to bookkeeping as one number, the tip has become a sale, and no amount of cleverness at the bank end can tell it apart again.

So the tip has to travel as its own line: out of the till apart from sales, into a liability rather than turnover, into payroll as a payment reported without withholding, and back to zero. None of that is hard. It only requires that the software treat the tip as what the law says it is, somebody else’s money passing through.