Tax Number Formats Around the World
In this article, we delve into the intricacies of Tax Identification Numbers (TINs), primarily focusing on those employed for consumption taxes like VAT, GST, Sales tax, and more. Across global jurisdictions, understanding the format and validation of these unique identifiers is crucial, as they provide insight into taxable activities, the nature of transactions, the type of entities involved, and tax remittance procedures.
We look not only into the multifaceted aspects of TINs and the importance of their validation, but we also illustrate the discussion with practical examples from tax number formats from the Americas, Europe, Asia, Africa, and Oceania.
What is a Tax Number?
Also known as a Tax Identification Number (TIN), a Tax Number is a unique identifier issued to taxpayers engaging in taxable activities in a specific country. This number, which can be a combination of letters and numbers, serves as a signal that the taxpayer is officially registered with the relevant tax authority.
Any taxpayer can hold a Tax Number from individuals and businesses to trusts and other legal entities. Furthermore, taxpayers can possess multiple TINs if they conduct taxable activities in more than one jurisdiction - there's no cap on the number of TINs a person or entity can have.
Interestingly, while every VAT/GST/Sales tax number is a type of Tax Number, the reverse isn't necessarily true; not all TINs are VAT/GST/Sales tax numbers. For instance, in Latin America, countries like Argentina, Mexico, and Colombia have a unified tax number that covers all forms of taxation, be it income tax, VAT, gift tax, or inheritance tax. In contrast, European Union countries often differentiate TINs based on the tax type.
To illustrate, in the Netherlands, the BSN (Citizen Service Number) applies to income tax related to employment or general communication with the tax authority. But for VAT purposes, the Dutch use a different tax number, the Btw-identificatienummer.
In the past, the VAT registration numbers for sole traders in the Netherlands were also tied to their individual social security numbers. But, due to the European Union General Data Protection Regulation (GDPR), which safeguards such personal data, a change was made. The Dutch tax authorities issued new VAT registration numbers to sole traders that became effective from January 1, 2020. So if you are having issues validating a Sole Trader’s number on your records that “looks accurate” but is somehow coming up as invalid, it could be a number in the old format (pre-2020).
Why do we need to understand the Tax Numbers formats?
Understanding the format of tax numbers is critical for several reasons. First, it verifies that the holder is an entity registered to pay taxes, rather than a non-taxable end user. In many countries, this distinction determines whether a transaction is classified as B2B or B2C.
Furthermore, it can indicate whether the holder is authorized to transact. Some EU countries have different VAT numbers or formats for domestic and intra-community transactions. The fact that one of these TINs is provided may indicate that your customer can make an intra-community supply or acquisition with you. A local VAT number may not allow you to carry out an intra-community B2B transaction. In contrast, a community VAT number may not allow you to carry out a domestic B2B transaction in the same country that issued the number, such as Croatia.
Moreover, a tax number can reveal the nature of the entity that holds it. Take Spain, where domestic VAT numbers (NIF) for businesses begin with a letter that signifies the type of taxpayer – 'A' for public limited companies, 'B' for limited liability companies, or 'C' for commercial partnerships.
Finally, a TIN can help you comply with your tax remittance. There are some countries, like South Africa, New Zealand, Poland, and South Korea, where the tax number is either part of the payment reference or the account number.
Still, to fully grasp these nuances, validating and cross-checking tax numbers is crucial.
Why should we validate Tax Numbers?
You need to calculate taxes (VAT/GST) when you sell products or services. At that moment, you need to know whether it is a transaction with a business or a consumer transaction. This is because transactions with other businesses (B2B) usually have a different tax treatment than transactions with consumers (B2C). This is especially true for cross-border transactions, but in several countries can also impact domestic tax calculations. The nature of the transaction also often drives whether you must issue a formal tax invoice to your customer and what should be included in that invoice.
To determine whether and how you need to charge your customer's consumption taxes (VAT/GST/Sales tax), you need to corroborate whether you are dealing with a business or a private individual. A critical step is to check ("validate") your client’s Tax Identification Number (TIN).
Indeed, there are many official public databases to validate tax numbers. However, in many, these checks can only be done manually.
One. Tax. Number. At. A. Time.
What if you need to validate 50,000 tax numbers? Or if you need to validate numbers across multiple jurisdictions and not just in Europe (where they at least have VIES)? From a business perspective, manual checking cannot be the answer. (If you would like to know our answer, skip to the last paragraph)
To learn more about tax number validation, please refer to The Essential Guide to Tax Number Validation.
Example Tax Number Formats from the Americas
Most Latin American countries have a similar approach: a single tax number for all purposes. This is the case, for example, in Argentina, Chile, Colombia, and Mexico.
However, other American countries have many tax numbers due to their large size and federal tax system.
The sales and use tax is levied at the state level in the United States. As a result, there are many different tax number formats as the individual states issue them. In this case, we share the format of the TIN, which is not related to a sales tax, but is used at the federal level.
On the other hand, indirect taxes in countries like Canada and Brazil may be collected at different levels - at the state or federal level, or harmonized, each with different TINs (GST/HST, QST, PST). In this scenario, we consider
Example Tax Number Formats from Europe
In the countries of the European Union, some Member States’ tax numbers have a specific format for domestic purposes and another for intra-community transactions. This is one of the reasons why the VIES (VAT Information Exchange System) database is insufficient to validate all of your customer's tax numbers. VIES only aims to cover VAT numbers activated for intra-community transactions. Therefore, in the table below, we analyze both intra-community and domestic VAT numbers.
On top of that distinction, Germany has a particular approach to tax identification numbers. It has two different ones for both companies and individuals for domestic purposes. However, the TINs for companies are provided by the various federal states, and their format varies between them. In addition, Germany has a special TIN for taxpayers who carry out intra-community transactions: Umsatzsteuer-Identifikationsnummer.
France has a similar approach. This country has one TIN for intra-community transactions and another for domestic purposes. However, in this country, the domestic TIN is released centrally and has a unique format that is the same for both companies and individuals.
Another country with a particular approach is Croatia. In this country, a taxpayer can have a VAT number valid for intra-community transactions but not for domestic ones. That is the case of the exempted businesses that are not required to register locally, but they may have a VAT number for intra-communitarian purposes.
The latest country to release an update on its VAT is Cyprus. In March 2023, this country decided to set a new format of a 9-digit code for new VAT registration. The first 8 digits must be numbers, from which the first digit shall be a 6, and the ninth digit shall be a latin letter that works as an alphabetic control character.
Example Tax Number Formats from Asia
In this continent, there has been a significant update about Tax Identification Number formats. On July 8, 2022, the Indonesian Ministry of Finance introduced a new TIN (NPWP) format, which will be fully mandatory by January 1, 2024. The new NPWP format will have 16 digits instead of 15 and will affect companies and non-resident individuals. The reform aims to align the NPWP format of these taxpayers with the NPWP format of Indonesian individuals whose TIN is equal to their NIK (Residency Identification Number), which consists of 16 digits. For those taxpayers who already have a 15-digit NPWP, the tax authority will issue them (upon request or ex officio) a new 16-digit TIN by adding the number 0 as the first character.
Example Tax Number Formats from Africa
South Africa illustrates a case in which the TIN is used for tax remittance. Their SARS number should be used as part of the payment reference section to allow the tax authority to allocate the payment.
Example Tax Number Formats from Oceania
Coming to Oceania, Australia is another example of different types of tax identification. While the TFN (Tax File Number) is used with respect to Income tax, the ABN (Australian Business Number) is employed regarding the GST.
On the other hand, New Zealand is one more example of a TIN tied with tax remittance. The IRD number is part of the bank account number where the payable GST amount should be transferred.
Conclusion
In essence, understanding the format and validation of Tax Identification Numbers (TINs) is fundamental to efficient tax administration and compliance, whether for individuals, businesses, or other legal entities. Across the globe, the structure, use, and validation procedures for TINs vary, reflecting the diverse tax systems and legal frameworks of different jurisdictions.
By familiarizing ourselves with local nuances and variations within domestic systems, we can ensure more accurate and efficient handling of taxable activities. The future may see further changes and adaptations in TINs, reinforcing the importance of continuous learning and monitoring of this ever-evolving field.
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