How to Pay International Contractors: 5 Easy Methods

If they’re not a U.S. citizen or a green card holder and working outside the U.S., collect a W-8BEN or W-8BEN-E and keep it on file. If both parties have a good understanding of the project’s scope, billing a flat fee is a great option. Make sure the contractor agreement outlines workflows, deadlines, and policies for missing deadlines. A well-drafted contract can save you a lot of money and QuickBooks trouble in the future, especially in cross-border matters.

Pros and cons of common international contractor payment options

Just because someone works remotely from another country doesn’t automatically make them a contractor. If you’re audited and cannot produce a valid Form W-8BEN, the IRS may assess penalties and require you to retroactively issue 1099 Accounting Errors forms. With Stampli, you can now pay international vendors in USD or local currency through international wire or Global ACH. Stampli International Payments allows you to manage your internal approval workflows and vendor payment details without leaving your AP automation system.

Step 4: Execute Payments and Ensure Ongoing Compliance

For small businesses, working with independent contractors around the world comes with significant benefits. Typically, contractor payment solutions are automated platforms that allow for contractor payments across international markets. Standard contractor payment solutions in the market integrate all foreign exchange fees into the payment and seamlessly transfer funds to a contractor. However, international bank transfers are not the best option for making timely payments, as they can take up to five business days to complete. Employers may also incur substantial banking fees and exchange rates in the process.

How Tarmack Keeps You Compliant (Without the Busywork)

• Each country has its own tax reporting requirements, so it is important to consult with a tax professional to determine the appropriate documentation needed when paying international contractors.
• A global money transfer network, SWIFT, connects financial institutions worldwide.
• To avoid hefty fees or restrictions, make sure you keep up to date on the subject.
• With Deel, global payroll implementation can take one to two months, depending on the number of employees and countries involved.
• Alternatively, you can use a contractor management platform that keeps track of each country’s requirements for you.
• There is no requirement for U.S. companies to file an IRS 1099 Form to pay a foreign contractor.

However, companies should be aware that now they are dealing with foreign labor and tax laws. Companies hiring foreign contractors can  experience difficulty in controlling quality of work because of language differences and lack of face-to-face communication. Some countries (including the US) may have labor laws relevant to paying foreign contractors.

Online payment platforms (e.g., Wise, PayPal, Payoneer)

This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions. Therefore, it is important that the facts support the principal-contractor relationship, showing that a contractor is autonomous, without the principal controlling how and when the work is done. Each country has different criteria to make a determination, but here are some ideas to support a contractor status. Don’t forget what happened to the company that had a conflict with a Brazilian freelancer.

Missing Quarterly Payments

If your contractor is a US Citizen working OUTSIDE of the US, the regular 1099 rules fall on them. Grab our FREE Tax Filing 101 guide paying international contractors to learn how you can save on your U.S. taxes and keep the IRS & state tax authorities happy. Tax deductions help reduce your taxable income, lowering the amount you owe to the IRS.

• The most common way to pay a contractor is through direct bank transfers or international payment systems like Wise, PayPal, Payoneer, etc.
• We want to ensure you’re routed to the right support team that can assist you with handling a foreign contractor and their payments, Mbrown11.
• Andrea Gomes is an acclaimed writer and expert in the Employer of Record (EOR) space, with over a decade of HR experience.
• Any specific questions you may have can be sent to /contact and we would be happy to assist you.
• Your business might be more concerned about the status of contractors when it expects to have certain control over them, or if the relationship becomes full-time or long-lasting.

Do overseas contractors need a 1099?

• As remote workforces are growing, more small business owners are recognizing the many benefits of hiring international contractors.
• Agreeing on this upfront, along with who will bear the cost of any transaction or currency exchange fees, is essential for maintaining a transparent and trusting relationship.
• As long as your independent contractor is not a US citizen or making US-source income, you don’t need to collect a Form 1099 from them as they are not a US taxpayer.
• Form 1099-NEC (and Form 1099-MISC in some cases) is issued to independent contractors based in the US that have been paid more than $600 within a tax year.
• Using tools and platforms that offer robust reporting features can simplify this process.
• Misclassification of contractors is serious and can lead to hefty penalties.
• If you’re ready to be matched with a Greenback accountant, click the Get Started button below.

You are now at a crossroads, armed with a clear understanding of what it takes to build a world-class process for paying international contractors. One path is the status quo, where your team continues to juggle different payment methods and manually chase down tax forms. The other path is to leverage this knowledge to champion a unified system that brings efficiency, compliance, and control to your global payables. Every country has different laws that affect how you hire and pay employees. If you’re looking to hire independent contractors in the Philippines , you need to have some background knowledge of local laws and business practices. You also have to understand how to classify your workers correctly in compliance with Filipino employment law.

Learn the nuances of local tax laws related to independent contractors

Misclassifying employees as contractors can bring harsh consequences, even if the mistake is unintentional. If you’re stuck at the intersection of international contractors and U.S. tax rules, we’ve got you covered. We’ll walk through when you need a Form 1099-NEC (and when you don’t), what forms to collect, how to pay foreign contractors the right way, and how to stay compliant without overcomplicating things. If you’re scaling across borders, understanding globalization and how it shapes HR procedures is critical. That’s not to say that there isn’t any additional paperwork required when you hire foreign independent contractors. The contractor is required to report and handle the tax payments within their own country, but the IRS requires you to report any money you pay to foreign independent contractors.

Keep in mind that different countries determine employment status based on contract and payment structure. For example, you may run into a situation where a country doesn’t recognize long-term contractor agreements and instead requires companies to hire contractors as full-time employees. This guide contains everything you need to know about paying independent contractors in other countries, compliantly and at scale. With the right service provider, this process can be a stress-free, cost-effective experience. For truly international contractors, you’ll typically need a Form W-8BEN or Form W-8BEN-E, depending on whether you’re working with an individual or a business.