Can I hire a contractor outside of the US?

You will be penalized if your foreign independent contractor is legally defined as an employee. If the worker lives outside of the US, there could be even more liabilities under applicable local laws. For example, in EU countries, you might have to pay at least 4 weeks of paid vacation and holidays per year.

Do I need to issue a 1099 to a foreign person?

As long as the foreign contractor is not a U.S. person and the services are wholly performed outside the U.S., then no Form 1099 is required and no withholding is required. By signing Form W-8BEN, the foreign contractor is certifying that he or she is not a U.S. person.

How much in taxes should be withheld for an international contractor?

It is the place where service is performed that determines the source of the income. If the foreign national lives in the US and performs the service in the US, the company must withhold tax at the rate of 30\% before compensation is made to the contractor.

Can a company withhold taxes for an independent contractor?

You do not generally have to withhold or pay any taxes on payments to independent contractors unless you are not provided with a required taxpayer identification number or are instructed to withhold by the Internal Revenue Service.

How do I report a payment to a foreign contractor?

Even though companies do not have to report foreign contractor payments to the IRS, they should have foreign contractors complete Form W-8BEN (for individuals) or W-8BEN-E (for entities). These forms are used to establish status as a foreign person or entity.

Do I withhold taxes for foreign independent contractors?

“U.S.-source compensation payments made by a U.S. business to a non-U.S. individual who is an independent contractor and who is not treated as a U.S. tax resident for the taxable year will generally be subject to 30\% gross withholding.”

Do international contractors pay US taxes?

Even without tax withholding, tax reporting is still necessary if the income foreign contracts made is US-sourced. If you are a US company paying international contractors, you need to report that amount to the IRS using Form 1042 and 1042-S, Foreign Persons’ US Source Income Subject to Withholding.