Which wage code should I use to pay tips?
It depends on the type of tip. There are 3 types:
- Untaxed tips: tips with no tax taken off.
- Taxed tips: tips that you pay through payroll, with tax taken off.
- Taxed tips the employee already received: for example, tips paid in cash. You don’t pay them again, but they still need to be taxed.
1. Untaxed tips → copy wage code 410
Make a copy of wage code 410 and give it a clear name, such as “Untaxed tips payment.”
Good to know: code 410 is untaxed, but it does not appear under “untaxed allowances” on the Annual Wage Tax Card (in Dutch: Jaaropgaaf, Loonbelastingkaart or Loonopgaaf). The other untaxed codes, 420 to 450, do appear there.
2. Taxed tips → copy wage code 140
Make a copy of wage code 140 and give it a clear name, such as “Taxed tips payment.” Code 140 is taxed. It also counts toward social insurance premiums (SVB/SZV wage).
3. Tips already received → use wage code 540
Use wage code 540, “Fringe benefit gratuities/tips.” This code is for wages in kind, meaning value the employee received without it being paid through payroll. The amount is not paid out again. It is only added to the wage used to calculate wage tax and social premiums. Code 540 is also taxed and counts as SVB/SZV wage.