French Government Extends Tax Exemption on Tips Until 2026 Budget Vote

The French government has announced an extension of the tax exemption on tips paid by credit card to low-wage employees until the approval of the 2026 state budget. Originally set to expire on January 1, 2026, this exemption applies to employees earning up to 1.6 times the minimum wage (Smic) and has been in effect since 2022.

An amendment proposed by Laurent Wauquiez, leader of Les Républicains, sought to prolong the exemption until 2028. However, deputies and senators failed to reach a compromise on the state finance bill before the end of the year, prompting the government to enact a special law to maintain the exemption temporarily, without introducing new measures. According to an official instruction published in the Bulletin officiel des finances publiques, voluntary tips paid by customers to eligible employees will remain exempt from withholding tax from January 1, 2026, until the 2026 finance law is enacted. Additionally, the exemption from social charges was confirmed in the 2026 social security financing bill adopted on December 16.

The restaurant sector has opposed any taxation on tips, emphasizing their importance as incentives for employees amid ongoing recruitment challenges. The government also temporarily extended the exemption for employer coverage of transport costs beyond the legal obligation.

This move ensures continued fiscal relief for low-wage earners benefiting from tips and offers the restaurant industry some stability while awaiting the 2026 budget approval.