Specialist services tend to work through desktop sites and apps – and you may need to register and verify an account to get started. For business customers, there are a couple of different ways you can use Revolut. You’ll also have to look at the delivery times to make sure your money arrives when you want it to.
- How tax laws treat payments to contractors can be different from one country to another.
- Traditionally, currency conversions have required manual calculations, leaving room for uncertainty due to fluctuating exchange rates.
- Wire transfer services likely offer currency exchange, but at much less favorable rates.
- That way, you can keep track of who was paid, how much, and for what services, allowing you to stay organized while ensuring compliance with IRS regulations.
- And that you’re getting a deal on your transfer that you — and your contractors — deserve.
Should I report payments made to foreign independent contractors?
Some independent contractors require upfront payments, wherein their clients must pay for their services in full before starting the project. Although this minimizes the risk of not getting paid for the contractor, it increases the risk for the client. If the work provided is incomplete or you’re not satisfied with the result, it can be a hassle to get a refund, and you may need to hire legal help to solve the dispute. An Independent Contractor is a self-employed individual hired to perform specific tasks or projects for a company under a bookkeeping contract agreement, rather than being an employee on the payroll.
How to Pay International Contractors in 2025: A Complete Guide
Standard contractor payment solutions in the market integrate all foreign exchange fees into the payment and seamlessly transfer funds to a contractor. Online money transfer providers, such as PayPal, Zelle, or Wise, are a convenient method for paying an international contractor. Once the sender and recipient have created their accounts, payments can be sent instantly via a mobile device or computer. You are required to report payments subject to NRA withholding on Form 1042-S and to file a tax return on Form 1042.
Method
There are some rules that you have to follow when hiring an international contractor. You can hire highly qualified contractors while paying less in wages but still offering a competitive salary in the given country. Xoom is owned by PayPal, but offers its own services to individuals and businesses exclusively looking to send money out of the US. Having an employee overseas is much more involved than engaging an independent contractor. EORs paying international contractors like Pebl (previously Velocity Global) help businesses grow globally without the administrative burden of setting up infrastructure in every country. It’s a scalable way to access international talent compliantly and efficiently.
You should also clarify the penalties for late payments and what documentation is required from both parties to conduct business successfully. Some payment platforms offer physical and virtual debit cards that allow contractors to use their funds directly. Due to its characteristics, PayPal is frequently used by small and medium-sized businesses, remote workers, and freelancers who often receive moderate payments. After the payer sends the amount, the transfer is processed in real-time, and funds are moved almost instantly. After that, the recipient can use these funds with their PayPal account or transfer them to their bank account, which can take one to three days.
Understanding Permanent Establishment Risk
Covering legal considerations, payment methods, and best practices, it’s essential for secure, compliant global payments. When engaging a foreign contractor, companies may need to ensure that the contractor is properly reporting their income and tax obligations to local authorities in their host country. It’s also a good idea to have a contract with an independent contractor that clarifies the worker’s role and tax and payment designations. Unlike regular employees, international contractors are typically engaged for specific projects or finite durations. The employer and contractor Statement of Comprehensive Income formalize their arrangement through a contract outlining the project scope, timelines, deliverables and compensation terms.
Independent contractors are responsible for their own taxes, benefits, and often provide their own tools and materials. Companies benefit from the flexibility and expertise of contractors while managing compliance with labor laws and tax regulations. Paying international contractors doesn’t have to feel like navigating a regulatory minefield. With the right knowledge and tools in place, you can build a global team while staying compliant, organized, and cost-effective.
Best for: Short projects, trials, milestone-based work.
And just because someone’s based in a different country doesn’t mean they can afford to wait for their paycheck any longer than a contractor who lives down the street from you. The information contained in this article is for informational purposes only, and cannot be relied upon for legal, financial, tax, or accounting advice. Any specific questions you may have can be sent to /contact and we would be happy to assist you. These Q&As do not constitute legal authority and may not be relied upon as such. They do not amend, modify, or add to the income tax regulations or any other legal authority. Your payroll software might be top-tier, but do your employees know when they’re getting paid?