One of the states’ functions is to identify its citizens and people who live there. One of these identification tools is the tax number. This is a code, usually with an alphanumeric nature, assigned to each taxpayer to identify them unequivocally. In this matter, it is not only necessary to identify resident citizens of a country, known as natural persons, but also organizations recognized by law, such as companies, corporations, etc., called juridical persons.
In addition to the tax number, several states use other types of numeric and alphanumeric codes to identify their inhabitants, which also work for tax purposes. This is the case of the National Identification Numbers, codes that are usually found on the IDs of the citizens of a state that identify them before the governmental authorities.
Apart from tax obligations, these numbers are essential for people who wish to receive certain services, particularly financial ones. For example, when registering your Blackcatcard account, you need to provide your tax id number.
Importance of the number of taxes for governments
This number allows a state to unequivocally identify its taxpayers in order to collect the corresponding taxes. For example, a physical person must pay income tax according to his/her salary or the assets he/she owns. Similarly, a legal entity –a company– pays this tax, among others, on the gross income generated by its economic and commercial activity.
Once a physical person reaches the age of majority, he/she acquires a tax liability. This does not mean that all individuals who are above the age of majority pay the same taxes to the same extent, but they are all subject to surveillance by the governmental authorities in charge of tax collection. On the other hand, companies, as juridical persons, depending on the tax regime, the type of company and economic activity, acquire tax obligations from their creation.
It should be noted that, in many cases, this number is used by a state not only for this purpose, but also to identify people and legal entities in other scenarios that involve the participation of the state itself, for example to guarantee them access to health care, education, subsidies, etc.
Importance of tax number for citizens, businesses and financial institutions
On the other hand, in addition to state entities, this tax number is essential for other organizations that need to unequivocally identify a person in order to offer a service in accordance with the law. This is our case at Blackcatcard, as well as any other financial institution. Being a neobank that offers financial services, we must use the tax number from the beginning to identify and verify our customers for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.
This means that any person, whether physical or juridical, must provide their tax number to register with Blackcatcard in order to pass the identification and verification process.
Once our clients are identified, we can accurately and transparently report to the competent authorities all activity related to their accounts, such as income and financial transactions. In this way we can fulfill our commitment and obligation to prevent tax evasion, fraud, money laundering, among other crimes.
How do I know what my tax number is?
Each state has its own tax rules and defines the guidelines to identify its taxpayers, both physical and juridical persons. However, there are some general characteristics that are found in most countries.
In the case of individuals, sometimes the tax number is the same as the one on the national identification document, which is issued by the competent authority of a country when a national reaches the age of majority (usually at the age of 18). This can simply be referred to as an identification number.
In general, obtaining a tax number is not complex. In most cases, you just need to go to the respective tax office of a country to apply for registration with the entity and receive the tax identification number, which usually corresponds to that of the national identification document, although in some countries it may differ.
In some jurisdictions, this procedure must be carried out only by those physical persons obliged to declare income because of the amount of their salary or those whose commercial activity is the purchase and sale of goods and services, since these are subject to consumption taxes, for example, Value Added Tax – VAT. Depending on the country, employees of a company, who are not obliged to declare income due to the amount of their salary, do not have to carry out this process. Their employer can simply withhold the corresponding taxes and report the necessary information to the tax authority using each employee's national identification number.
In the case of companies, they obtain their tax number during the business registration process. In many jurisdictions, just like a physical person, a representative of a company must register the company with the respective tax office in order to be assigned a tax identification number.
Although it is sometimes necessary to perform this registration at the tax authorities' offices, many jurisdictions have implemented digital solutions so that individuals and legal entities can register from anywhere through web platforms.
On the other hand, the number of taxes has relevance not only for the states, but also for the individuals and legal entities to which it belongs. For example, many countries have special rules for VAT refunds to both physical and juridical persons. This in the framework of social programs, tax regimes to encourage investment, balances in favor of the taxpayer in the accounting of tax authorities, etc. It is even common to find countries that offer VAT refunds to tourists and non-resident visitors for acquiring goods and services subject to this tax in their territory. It is precisely through this tax number that they can receive this VAT refund.
Numbers and tax authorities in different countries
As we said before, each state autonomously establishes the structure of this number for physical and juridical persons, and Europe is no exception, as there is no single tax identification number.
In Germany, for example, it is known as Steuernummer (which translates as tax identification number) and is provided to both physical and juridical entities by the Federal Tax Office. In this country, absolutely everyone seeking to work there are required to obtain this number.
In France, it is called Numéro d'Identification Fiscale – NIF (i.e. tax identification number). To obtain a tax identification number, individuals must contact their local public finance center. Companies obtain a number, called Système d'identification du répertoire des entreprises – SIREN (Business Directory Identification System), issued by the French Institute of Statistics and Economic Studies – INSEE (Institut national de la statistique et des enquêtes économiques).
As for Malta, the system is simplified, as individuals do not have to apply for a tax number, as the Tax Registration Number of Maltese citizens is their ID number. For foreigners, it is also extremely simple. For EU nationals, a Tax Identification Number is automatically generated if they have registered with the Department of Social Security. And those coming from other countries, who are issued a single permit, are also automatically registered. In any other case it is necessary to apply for a Tax Identification Number through a registration form on the web portal of the Office of the Commissioner for Revenue. Similarly, companies obtain an Income Tax Number automatically when they register with the Malta Business Registry.
In Spain, both physical and juridical persons obtain a Número de Identificación Fiscal – NIF (tax identification number in English) from the Tax Agency of the Ministry of Finance and Public Function. For individuals, the number is based on the same number that appears on the DNI – National Identity Document, which is obtained by all Spaniards over 14 years old and residing in the country for more than 6 months a year.
Easier than it looks
Considering the general characteristics of tax numbers, the great importance and the ease of obtaining them, you will surely understand better what to do not only as a taxpayer, but also as a customer seeking access to public services –health, education, grants– or other types of services, such as financial ones, among which accounts, credit cards or any kind of credit product stand out.
Do I need a Tax Identification Number?
Depending on the country in which you are a permanent resident, you do need this number, not only to comply with tax obligations, but also to access financial services, among others.
Is it easy to obtain a Tax Identification Number?
All governments have implemented mechanisms, especially digital ones, that make obtaining these tax numbers very quick and easy for both individuals and legal entities.