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Writer's pictureZen Associates

How to Pay International Employees and Contractors


contractors

Posted and written by Zen Associates, May 29, 2024.


Finding talent globally is a strategic move for many companies looking to tap into diverse skill sets and expertise. However, paying international contractors and employees involves navigating various legal and administrative complexities. Here, we outline the six best ways to pay international contractors, simplifying the process for you.


Hiring International Talent: The Basics


For startups without an internal HR department, tasks like hiring and payroll often fall on the founders. Understanding the best practices for paying international employees and contractors is crucial. Here's a breakdown:


Hiring International Talent as a Contractor:

  • Quick and low administrative burden.

  • Ensure your attorney approves the contractor agreement.

  • Pay contractors using an overseas wire transfer.


Hiring International Talent as an Employee:

  • Setting up an international subsidiary for paying remote employees.

  • Consider a Professional Employer Organization (PEO) for easier setup and management.


The Six Best Ways to Pay International Contractors


Upload invoices for documentation and easy tracking.

Offers international wire transfers at affordable rates.


Wire Transfers:

Traditional method but may not be suitable for all countries due to banking system limitations.


Gusto or Rippling:

Both platforms are expanding their capabilities to pay international contractors.

Rippling allows global contractor payments.


Payment Apps:

Use online payment methods like PayPal or TransferWise for convenience.


Founder Reimbursement:

If paying through a founder's personal account abroad and seeking reimbursement from the company, it may require reporting for FBAR/FinCEN compliance.

Invoices are required for reimbursement and corresponding bookkeeping.


Bitcoin:

An option, but be cautious due to accounting complexities and fluctuating currency values.


Key Considerations


  • Invoice Management: Keep detailed records of invoices for accounting and compliance purposes.

  • Legal Compliance: Ensure contractor agreements are ironclad and enforceable.

  • Professional Advice: Consider consulting with a tax professional or legal advisor for guidance.


W-8BEN May Be Required


It’s a great idea to collect IRS form W-8BEN from overseas contractors. The W-8BEN is an official form that foreign individuals or entities should complete and provide to their U.S. payors if they’re receiving certain types of income from sources within the United States. The W-8BEN certifies that your international contractor is not a U.S. Citizen and not subject to U.S. Withholding Tax. It is collected by US companies for their records and is liability protection for the company. The W-8BEN is for foreign individuals while the W-8BEN-E is for foreign entities. The form is valid for 3 years.


Hiring Tips


Navigating international employment can be daunting, but hiring a good tax professional is essential to ensure compliance and avoid costly mistakes. With the right knowledge and assistance, you can manage your compliance effectively. If you need help with your startup's taxes, feel free to reach out to us. We're here to help!



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