Global HR — 10 min

Foreign tax ID: A guide for employees and contractors

Written by Sally Flaxman

November 13, 2024

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Working for a company based in another country opens up all kinds of possibilities. It can allow you to explore unique professional growth opportunities, give you access to diverse work culture, and‌ may offer your personal flexibility and financial growth.

The not-so-fun side of working under a foreign employer? Dealing with tax responsibilities. Depending on your situation, you may need to secure a foreign tax ID to stay compliant in both your country of residence and your employer’s location.

But if that sounds as foreign to you as traveling to another country, we’re here to help. In this article, we cover what these tax IDs are, why they’re important, and how you can get one.

Jump straight to a key chapter

What is a foreign tax ID?
Why do you need a foreign tax ID?
How can you get a foreign tax ID?
What does your employer need to know?
Stay compliant across the globe with Remote

What is a foreign tax ID?

A foreign tax ID (FTIN) is a tax identification number issued by the country where an employee or independent contractor lives. You might need one if you work for an employer in a different country.

For example, if an employee living in Italy works for a business located in Sweden, they need to give their company their foreign tax identifying number that was issued in Italy.

These identification numbers are crucial for ensuring both employees and employers remain compliant. Even if you work for a company outside your home country, you can still legally pay taxes where you live with a foreign tax ID.

Considering these numbers vary by country, there is no standard format for a foreign tax ID.

In India, for example, they’re called 10-digit Permanent Account Numbers (PANs). In Bulgaria, tax IDs for both foreigners and citizens are 10-digit numbers, although they go by different names. You can find all the details about tax IDs in different countries here.

However, foreign tax IDs are different from VAT identification numbers. VAT numbers are specific to ‌Value Added Tax, and they’re primarily used in European countries.

Why do you need a foreign tax ID?

If your employer is located in a different country than your home country, you generally need a foreign tax ID to legally receive your wages and follow local tax regulations.

In fact, it’s a requirement to have a foreign tax ID in many countries.

In Spain, for instance, anyone involved in any tax-related transaction needs to have a tax identification number called a NIF. A NIF is required for any type of economic transaction in Spain, such as opening a bank account.

Even if it’s not a federal requirement, you may still need this number. Here are all the reasons you typically need a foreign tax ID when working for a company in another country.

To stay compliant

Your employer needs your foreign tax ID so that they can correctly classify you as either an employee or an independent contractor.

Both you and your employer have different tax responsibilities for each classification, which you must follow to stay compliant.

Different countries have varying requirements regarding tax compliance. But in general, you should follow the tax laws related to needing a foreign tax ID in your home country. If you live in Germany, for example, here’s what you will need to know: a German taxpayer identification number is an 11-digit Steuer ID (also called a Steueridentifikationsnummer). You would need it to file tax returns, get tax refunds, and receive benefits. All German workers need one, or else they risk fines and penalties.

To receive benefits

Not only are foreign tax IDs used to pay taxes, but they’re often needed to receive benefits or complete other routine tasks in the country you live in.

For example, if you don’t have a tax ID number in Australia (called a TFN), you can’t apply for government benefits or allowances (like social security), complete your tax return online, or apply for an Australian business number.

Plus, a variety of institutions in your home country may ask for your tax ID. In Australia, this can include banks, government agencies, and superannuation funds (Australian pension programs).

To ensure your taxes are withheld accurately

In some countries (like Australia), you may technically be able to work without a tax ID. However, not having one can create complications regarding how much your employer pays you and how much of your taxes they withhold.

In Australia, your taxes are initially deducted at the maximum rate without a TFN. It’s possible to correct this later, but it requires additional time and effort.

For the most part, if you don’t obtain a taxpayer identification number in the country you reside in, you won’t be able to pay your taxes. The consequences can include fines, penalties, and legal action. Plus, companies may not hire you in the first place if you don’t provide them with your foreign tax identification number, as doing so can create compliance issues for them.

How can you get a foreign tax ID?

Now that you know how important it is to have a foreign tax ID, let’s discover how you can get one.

How to get a foreign tax ID in the US

If you aren’t eligible to receive a social security number in the US but are required to pay US taxes, you must apply for an individual taxpayer identification number (ITIN). US residents and nonresident aliens can fall under this umbrella.

Your ITIN will be a nine-digit number that begins with the number nine. The application (called Form W-7) can be found online, and you have a few options for applying:

Mail your W-7, tax return, proof of identity, and foreign status documents to the IRS office in Austin, TX.
Apply in person with an IRS-authorized Certifying Acceptance Agent.
Make an appointment at a designated IRS Taxpayer Assistance Center.

You can apply any time throughout the year when you have taxes that need to be filed or reported. However, make sure to complete Form W-7 by the time you need to file your federal income tax return to avoid any interest, penalties, or delays.

You may need to file Form W-8BEN instead with your foreign tax identification number if:

You’re not a US citizen
You’re not a full-time employee of an international organization on a G4 visa
You’ll be in the US less than 183 days out of the year (and you meet all the rest of the qualifications to not be a US taxpayer)

If you can’t provide a foreign tax ID (e.g. your home country doesn’t issue them), you must fill out this form as well, explaining why you don’t have one.

How to get a foreign tax ID in a country outside the U.S.

The process for obtaining a foreign tax identification number is different in every country.

However, here are a few examples of what it could look like.

In Italy, people who are physically present in Italy for more than 183 days out of the year are considered tax resident individuals. They’re subject to personal or national income taxes in Italy under the worldwide principle, even if the money is earned in another country. The exception here is if the country your company is in has a tax treaty with Italy (more on that below).

If you transfer your tax residency to Italy from another country, you may be eligible for a flat substitution tax. But non-residents of Italy can only be taxed on income that is earned in the country.

Non-EU citizens can obtain a tax ID in Italy by:

Visiting their local Sportello unici per l’immigrazione or police headquarters
Applying at the Italian Revenue Agency

Meanwhile, EU citizens can apply at any Italian Revenue Agency office.

In Canada, on the other hand, you can use your Social Insurance Number (SIN) as your tax ID if you’re a citizen or a resident. But if you don’t qualify for an SIN, you need a nine-digit TIN. To get one, fill out an application and mail it to the Canada Revenue Agency. It can take six to eight weeks to hear back.

What does your employer need to know?

Securing a foreign tax ID isn’t just important to you — it’s also often needed for your company to stay compliant. Here’s what your employer needs to know.

What do you need to provide to a foreign employer?

The exact requirements for your foreign employer depend on what country they’re in. But in general, employees should provide their tax ID to their employer. Independent contractors may not always need to, although it can help your business classify you correctly.

For example, when companies in the US hire independent contractors living in other countries, the contractors are generally in charge of their own taxes. So if you are an independent contractor with a foreign tax ID, you have much more responsibility when it’s time to file your taxes.

But if you’re an independent contractor in Germany, for instance, your US employer still needs you to fill out Form W-8BEN for their records. Even though it’s not required for your company’s tax purposes, it serves as documentation for why they’re not withholding your taxes.

All of this changes if you’re an employee. US companies need to ensure they’re withholding their foreign employees’ taxes correctly, and following all local tax and compliance regulations in your country of residence. To do so, they’ll generally need your foreign tax ID.

Your company may use an employer of record (EOR) or an international professional employer organization (PEO) to handle these types of administrative duties.

Tax benefits for global teams

If your country of residence has a tax treaty with your company’s country, you may qualify for reduced tax rates. Learn more about specific treaties between the US and other countries.

Tax treaties can help you avoid double taxation, which is when taxes are paid twice on the same income. If you pay taxes in your home country and your company’s country for the same wages, for instance, this can count as double taxation. The two main types of tax treaties exist through the Organization for Economic Co-operation and Development and the UN Model Double Taxation Convention.

If you live in a country that participates in a tax treaty, you can claim a foreign credit in the country it has a relationship with so you don’t have to pay taxes on the same income twice. Examples of partnerships include:

US and Austria
Vietnam and Iceland
Sweden and Mexico
India and Italy

Stay compliant across the globe with Remote

Now that you know how important (and complicated) it can be to secure a foreign tax ID number when working for a company in another country, it’s time to get started. But if navigating the legalities of all these requirements and documents sounds overwhelming, Remote is here to simplify the process for you.

Remote offers comprehensive assistance to both employers and employees in managing their taxation requirements. From tax calculation, payroll compliance, and tax form filing for employers to tax withholding and support for Equity compensation for employees — Remote allows both employers and employees to focus on their work while ensuring compliance with local tax regulations across multiple countries. To get started, speak to one of our in-house experts today.