Tax Identification Number

Often referred to as a tax identification number, the tax identification number is a numerical designation assigned to a business entity operating in a particular locality. The primary purpose of tax identifiers is to quickly identify the entity to associate tax withholding and payments to the business. Additionally, many companies use vendor tax identification numbers as an aspect of their internal accounting procedures.

The tax identification number serves in many ways the same purposes as a social security number for an individual. This number is used to associate all relevant tax and income data with a specific entity and to ensure that, from a tax point of view, everything remains in order. In many countries around the world, a tax identification number is required before the business can legally operate in the country.

Part of the process of starting a business is applying for and receiving a tax identification number. This is often seen as a step taken just before or just after the formal incorporation of the business. Some countries require a business to have a tax identification number before it can incorporate. Others allow incorporation with the understanding that the tax ID number will be requested and added to the incorporation within a specified time frame.

It’s not unusual for home-based business people to apply for a tax ID number instead of just using their social security number. In a way, it’s a great way to separate personal and professional finances. However, self-employed people who are freelancers may not wish to be incorporated and therefore do not necessarily need a tax identification number to file or pay taxes.

The assigned tax identification number remains the property of the issuing government agency and may be revoked if it is determined that the company is not operating under the conditions that apply to the extension of the identification number. Many companies will not work with suppliers who are unable to provide a valid tax identification number, as this will result in the supplier not operating within the necessary legal boundaries.

How do I know what my TIN is? 

The only thing you need to know about your NIF is your Identity Card. We’ve highlighted a few exceptions… So you’re probably wondering how to get your tax ID number if you don’t have an ID card.

In the case of a person with Spanish nationality, there are two cases in which they can be exempted from having an identity card and, therefore, can voluntarily ask the Tax Agency to assign them a NIF. The first case is that of residents abroad (whose TIN will always start with the letter L), and the second is that of children under 14 residing in Spain (in this case the initial letter will be K).

It is also possible that a non-Spanish person voluntarily asks the tax authorities to assign him a TIN to process certain transactions. In general, the code starts with the letters X, Y and Z. However, if the person does not have an NIE (foreign identification number), it will start with the letter M.

NIF Auto-entrepreneurs

And what happens then with the auto-entrepreneurs? It’s very simple: the self-employed are also natural persons. Therefore, their TIN will match the identity card.

And that’s not all: as a natural person, the identity card will also be the TIN of your own company as a self-employed person.

When is the TIN used?

The TIN is used to identify a legal person when carrying out any procedure with tax implications. This is why any professional or entrepreneur must include it in the invoices and supporting documents generated during the fiscal year.

But there are also other cases where you will need to use the tax identification number:

• Acts or documents establishing, transferring, or extinguishing rights in rem over real estate.
• Transactions with credit institutions
• Insurance or financial transactions with insurance companies.
• Contributions to pension plans

What is the intra-community TIN?

At this point, we must recognize that there is a type of NIF that we have not yet dealt with: or called intra-community VAT. This is the identification number that a person, company, professional, or entity obtains once it is registered in the register of intra-Community operators (Validation of the VAT number by VIES).

This document allows you to work within the European Union while benefiting from certain special VAT regimes. Which, when operating in a more global system, is much appreciated.

Difference between TIN and VAT

Has everything we explained in the previous point made you think of VAT acronyms? It’s normal. Warning, it is necessary to make a difference. After all, the VAT is the same thing as the intra-community VAT number… But it is not the same thing as the NIF.

VAT is made up of the VAT number of a person (natural or legal) and the acronym of the country in which it is taxed. Let’s say your VAT number is B83762910. What will your VAT number be? Very simple: it will be ESB83762910. No more no less.

TIN or CIF? 

Have you been wondering for a long time what the VAT number has to do with all this? What is the difference between TIN and CIF? Well, they differ in everything and nothing. And it is that the CIF (tax identification code) ceased to be in force at the legal level a few years ago.

At the time, the CIF was used to identify legal persons, whether companies or foundations. However, since 2008, this code has been completely removed. Until then, the TIN only identified people who carried out commercial activities. But, from 2008, with the entry into force of Decree 1065/2007, of July 27, the CIF disappears and natural and legal persons begin to use the NIF.

It is therefore important to permanently forget the CIF (in case we have it). The NIF is the identification number that must appear on your invoices and the code that you will need to use to identify yourself for tax purposes.

We can say that you know absolutely everything about the tax identification number.