What exactly is a personal US tax identification number (ITIN)?
The abbreviation ITIN stands for US Individual Taxpayer Identification Number and can be briefly referred to as your personal identification number and US tax number in the US tax system. It is required for anyone who needs a US taxpayer number from the Social Security Administration (SSA) of the US Internal Revenue Service (IR) and helps people without a social security number to file a tax return. This is simplified by all non-US residents of any citizenship who have US rental income, income from participations and, for example, sales proceeds from US real estate and have to pay taxes on them or receive a tax refund.
Anyone can apply for an ITIN
You can often read this statement online. While in the past it was actually possible for everyone to apply for a US ITIN, today the ITIN is only awarded very selectively. The advantages of ITIN are too great for you to make them easily accessible to everyone. The IRS would really be overrun with applications and would not have the capacity to process them.
The ITIN is therefore only awarded today to persons who have to file a US tax return. The ITIN application will then be sent to the IRS together with the tax return. It is not possible to issue an ITIN before filing the tax return.
Advantages of an ITIN
The ITIN has a number of advantages for you. With the ITIN you can:
- Open accounts with all US banks (Chase, Bank of America, Citi, etc.) for yourself and your company.
- Open a PayPal account and PayPal business account.
- Possibly build up a good credit rating and a credit score in the USA and get ITIN Loans.
- Conclude a mobile phone contract in the USA.
- Avoid withholding tax on future US income.
But there are exceptions to every rule
So even a small circle of people can apply for an ITIN independently of the submission of a US tax return. These include, among others:
- People who work in the academic teaching business of the USA and receive tax-free remuneration from the university, e.g. expense allowances.
- People who carry out temporary activities on site in the USA (e.g. assembly), but do not have to pay tax fees paid from the USA in the USA due to a double taxation agreement.
- People who own a US property AND have a US brokerage/US financing (owning a property alone is NOT enough to get an ITIN).
- People who own a US property AND rent it out through third parties (e.g. AirBNB). Direct rental is not sufficient to obtain an ITIN in advance (but the landlord of a US property would apply for an ITIN when submitting the US tax return).
- People who have made gambling winnings in Las Vegas.
- People who receive capital gains in the USA during the year.
Also entitled to apply for an ITIN regardless of the submission of a US tax return are:
- Shareholder of an LLC (IMPORTANT: Anyone who is the only member of an exempt LCC and applies for an ITIN gets entangled in contradictions against the IRS. Why do you need an ITIN if the income from LLC in the USA is tax-free anyway? We only advise LLC shareholders to apply for an ITIN with reference to the LLC if the LLC is taxable in profits in the US).
- People who are managing directors AND shareholders of a C-corporation and
- People involved in a US Limited Partnership.
I don’t meet the conditions for an ITIN but I still want to have one
If you are neither taxable in the USA nor meet the requirements for one of the exemptions, your desire for an ITIN is not in good shape.
The easiest thing would be to set up a US LLC or a C Corporation. But here, too, you have costs and circumstances that you would rather avoid.
We have an even simpler solution ready for you: For a small fee of $450, you will become a limited partner in one of our US limited partnerships. In this way, you officially meet the conditions for obtaining the ITIN.
