The question regarding the tax implications in relation to the receipt of tips in the service industry (and other industries) has created much uncertainty over the past few years.
In a recent draft interpretation note released by SARS, SARS aims to clarify the tax position relating to the receipt of tips. From the outset it must be noted that the draft interpretation note does not deal with the tax implications of the compulsory service charges which are added by the owner to the patron's bill (for example, adding a 10% service fee to a restaurant bill for tables of greater than eight guests), as these service charges are generally received by the owner for his own benefit and thus included in that owner's gross income. The draft interpretation note therefore only focuses on the tax implications of the tripartite tipping relationship between the employee, the employer and the patron.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.