Difference between sales tax and sales tax TIN

What the international tax number is all about

Some examples

To distinguish whether or not you have to show sales tax on an invoice you have sent to other EU countries, it is important whether your customer is a private person or an entrepreneur. If it is a private person to whom you invoice goods or services in other EU countries, the sales tax must be calculated at the rate applicable in Germany.

If it is a company in another EU country to which you, as an entrepreneur, sell goods or services and invoice them, sales tax does not have to be shown. Because then your customer has to pay the sales tax to his tax office. Your and your customer's VAT ID must be on the invoice.

This is referred to as the so-called "reverse charge procedure", which means nothing more than that the recipient of the service and not the provider of the service owes the sales tax. It is common to state this on the invoice: "Tax liability of the service recipient". This means that your customer calculates the tax based on the tax rate in their country, reports it and deducts it as input tax.

How it works in non-EU countries - using the example of the USA

In the USA, a TIN is also used, which is written out but has a slightly different name: "Taxpayer Identification Number" or ITIN - "Individual Taxpayer Identification Number". This is a nine-digit tax processing number that is issued to taxable persons by the US tax authority "Internal Revenue Service" (IRS for short, comparable to the German tax office). You have to apply for this number. The IRS issues ITINs to those people who need a US tax number but are not authorized to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).

More precisely: these are people who are not entitled to a social security number, but are required to submit a tax return. For example, foreigners need an ITIN to file a tax return or apply for a tax refund. The ITIN is used for tax purposes only and cannot be used for any other purpose outside of the tax system.

For the application you need the form W-7, together with some important documents. The processing of the application can take up to eight weeks.

Note: Since the form for applying for an ITIN is very complicated, the tax authority IRS is not very tolerant of errors and rejects many applications, it is advisable to seek advice and help with this process.

Good to know: By law, a person cannot have both an SSN and an ITIN number. If you have an ITIN and use it for a tax return, this guarantees quick processing and a quick refund. Sometimes you need the ITIN when opening a bank account.

Speaking of bank accounts: Have you heard of our clever bank account with many extras included, such as the calculation of income tax? You can find all information about this under Taxator - the easiest way to calculate your income tax.