I’m currently in negotiations to do some remote work for a Silicon start-up. As this is my first time working in one country and getting paid in another, I dived into my research to understand the complexities of international tax laws. Here is a summary of my findings with links provided at the end.
Scenario 1: Employee living overseas; citizen/resident of corporation country/countries.
In this scenario, employees can live abroad and receive payments in their “home” bank account. This way the taxes can be automatically deducted using a PAYE system. If you’re looking for remote work opportunities, you’ll find that many companies prefer this scenario due to its ease of navigating employment laws, payment methods, and taxes.
Scenario 2: Employee living overseas; non-citizen/non-resident of corporation country/countries
Employees can receive a gross salary and take responsibility for paying their own taxes.
Or they can be “seconded” to temping agencies such as ‘Manpower’; in this case the employees are paid by the local temp agency while they work for the original employer.
Or, employees can be paid as independent contractors, though caution is advised to ensure that they qualify as an independent contractor.
Note, if the employee should spend considerable time working in the country of payment, they could also be liable to double taxation.
In either scenario, by hiring an employee based in a foreign country, depending on the countries concerned, the company may be legally required to open a corporate entity in that country from which the employee will be hired and paid.
For more information see:
- Transferwise. (1 Aug. 2017). Paying employees overseas from UK in ‘Transferwise blog’.
- Babcock, Pamela. (2 Dec. 2015) How to Pay Employees Working Across International Borders in ‘Society for Human Resource Management’.
Chapo, Richard. A., (21 Jun. 2013). Tax Obligations When Hiring Overseas Independent Contractors in ‘Internet Law: Richard A. Chapo, Esq’.