EIN vs. VAT: Understanding international differences
Tax processing for international businesses can be a complex process, especially when you need to use identifiers from multiple countries. Two important tax identifiers that appear frequently global business discussion are the employer identification number (EIN) and value-added tax (VAT) number. While both are important, they serve different purposes and operate in different jurisdictions. This article will detail what EINs and VATs are, why businesses may need them, and how they are used in cross-border transactions. What is an EIN? An Employer Identification Number (EIN) is a nine-digit number issued by the United States Internal Revenue Service (IRS) to identify a business for tax purposes. Often compared to a Social Security number, but for businesses, an EIN is critical for tax reporting, payroll management, opening business bank accounts, and establishing business credit in the United States. Who needs an EIN? In the United States, businesses that employ employees, operate as a corporation or partnership, or file certain tax returns are…
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