Hiring a contractor abroad — global payroll tax compliance: where does doing it myself start to cost money?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: services performed inside the country generally attract withholding on the gross fee, recoverable by the contractor only through a return or reduced in advance by a waiver.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Do we have to withhold tax when paying a contractor who lives abroad?
The test is not where the contractor lives. It is where they physically do the work. Services performed inside the country generally attract withholding on the fee, and that obligation sits on you as the payer regardless of where the invoice comes from or what the contract says about the parties' intentions. Services performed entirely abroad usually fall outside that withholding and into a different reporting regime with different certificates. So the first question in every one of these files is a factual one about where the person was when they worked.
Our contractor invoices from abroad but flew in for the work — does that matter?
Yes, and this is the single most common way payers get caught. An overseas address on the invoice, payment to an overseas bank account and a contract governed by foreign law do not change where the services were performed. If the work was done inside the country, the withholding obligation generally follows the work. Time split between the two is treated as what it is, split, which means the days need to be recorded as they happen. Reconstructing a travel pattern from expense claims a year later is possible but nobody enjoys it.
Can the withholding be reduced before we pay rather than reclaimed later?
Often, through a waiver applied for in advance. This matters because withholding applies to the gross fee, not to the contractor's profit after their own costs, so on an engagement with real expenses behind it the tax withheld can exceed the tax that will eventually be due. A waiver granted before payment reduces what you hold back at source. The application takes time and has to be made before the payment, so it belongs in the engagement planning rather than in the accounts payable run the week the invoice arrives.
Is the withholding calculated on the invoice total or on their profit?
On the gross fee. That is the point contractors object to most, and they are not wrong to find it uncomfortable: a contractor with substantial costs of their own can see tax withheld that is a large share of what they will actually earn from the job. The mechanism assumes nothing about their expenses. Their route to the correct final figure is either a waiver obtained in advance or a return filed afterwards claiming their deductions and recovering the excess. Explaining this to the contractor before the contract is signed avoids an argument at payment.
What if our contractor refuses to accept the deduction from their fee?
The obligation is yours as the payer, and it does not move because the contractor disputes it. If you pay gross to keep the peace, you can be left owing the amount you should have withheld, out of your own funds, with the contractor already paid in full and abroad. The right time to have the conversation is before the engagement: set out that the withholding will apply, explain the waiver route and the return route by which they recover the excess, and put the agreed treatment in the contract.
Do we report a contractor who worked entirely outside the country?
Usually there is still something to do, just not withholding. Work performed entirely abroad typically falls into a different reporting regime, with its own forms and its own certificates to collect from the contractor establishing who they are and where they are resident. Treating it as nothing at all because no tax was deducted is how payers end up with a reporting failure rather than a withholding one. We establish which of the two regimes each engagement falls into at the outset and set up the corresponding paperwork.
Where does global payroll tax compliance usually break down?
On the question of who the worker actually is. A contractor engaged abroad may be an employee under the law of the country where the work is done, whatever the agreement says, and that reclassification carries withholding, social charges and, in some countries, a permanent-establishment argument for the payer. Compliance is decided by the working relationship and the place of work rather than by the invoice, so both are documented before the first payment runs.
What is an ITIN and how do I get one?
An individual taxpayer identification number, for people who have a US filing or reporting reason but cannot obtain a Social Security number — a non-resident claiming a treaty rate or a refund, a foreign spouse on a joint return, a dependant, a foreign seller of US property. You apply on Form W-7 with certified evidence of identity and foreign status, normally submitted with the return that creates the need. It is a tax number only, and it confers no immigration or work status. See ITIN applications.
