What it means
Every tax system needs a way of knowing who is who, and the TIN is the label. It lets the authority match income reported by employers and banks to the right taxpayer, and it lets taxpayers prove their identity when dealing with the authority.
Without it, the authority would struggle to link a payslip, a bank statement and a return to the same person. The format and name differ by country.
In the United States, individuals use a Social Security Number, businesses use an Employer Identification Number, and some foreign individuals who need to file use an Individual Taxpayer Identification Number. Many other countries use a similar single number or a mix of numbers for personal and business purposes.
Businesses use the number constantly. It goes on supplier forms, invoices, customs documents and payroll filings, and it is often the first thing a new customer or bank asks for before agreeing to work with you.
Giving a customer the wrong number is a common cause of rejected invoices and delayed payments. International banking and cross-border reporting have raised its importance.
Banks collect the TIN of account holders in order to report interest and other income to the relevant tax authority, and missing details can delay payments or lead to higher withholding. Many countries now exchange this information automatically, so the number plays a part in global transparency.
Keeping the number secure is a practical priority. Because it can be used to file returns and open accounts, a stolen number can lead to identity fraud, so it should be shared only with parties that genuinely need it.
Companies should limit access to staff who genuinely need it and store it in a protected system. The nuance is that a TIN identifies a taxpayer but is not itself a tax registration for every type of tax.
A business may need a separate registration for sales tax, value added tax or payroll, even though it already has a TIN. Check which registrations your business needs when it starts trading or expands into new regions.
In practice
Real-world examples.
Example
A marketing consultant in London starts working for an overseas client. The client's finance team asks for her tax number on the supplier form before they will release the first payment. She supplies it, and the payment is processed with the correct reporting. The client also asks for a signed form confirming that she is the owner of the number.
Example
A start-up founder sets up a company and applies for its employer number. He needs the number to run payroll, open a business bank account and register for a payment processor. The bank will not complete the account opening without it. He keeps a copy of the confirmation letter in the company's records for later requests.
Example
A foreign investor opens a brokerage account in another country. The broker requires the investor's tax number from home to report any interest correctly. Leaving it blank would result in a higher rate of tax being withheld. The investor sends the number once and the broker applies it to future payments.
Case study
Seen in the real world.
Greenfield Imports is an illustrative, fictional wholesaler that works with about 60 suppliers in several countries. The accounts team found that payments to six suppliers were being delayed each quarter because the tax numbers on file were missing or incorrect.
The finance manager introduced a simple rule. No new supplier could be set up in the payment system until the form had a tax number and a copy of the registration certificate, and the numbers were checked against the format used in that country.
In this illustrative story, the delays disappeared within two quarters, and the company avoided penalties for incomplete payment reports. The team also stored the numbers in a restricted-access system to limit the risk of misuse.
Watch out
Common mistakes.
- Assuming every country uses one number for every purpose, when many separate personal, business and indirect tax registrations.
- Emailing the number around casually, which raises the risk of identity theft and fraud.
- Entering the number from memory on forms, when a single wrong digit can cause rejected filings and delayed payments.
Questions
People also ask.
Is a TIN the same as a Social Security Number?
A Social Security Number is one kind of TIN used for individuals in the United States, and other kinds exist for businesses and non-residents.
Where do I find my business's TIN?
It is on registration letters from the tax authority and on tax returns that have been filed.
Can I use someone else's number?
No, using another person's number to file or open accounts is a serious offence.
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