Paying Non-US Contractors: What Every Startup Needs to Do (Step-by-Step)
Hiring international contractors is now standard for startups. It’s fast, cost-effective, and gives you access to global talent.
But when it comes to taxes, many founders are unsure what actually needs to be done, or worse, assume nothing is required.
That’s where problems start.
If you’re a US company (especially a Delaware C-Corp) paying non-US contractors, there’s a simple compliance process you should follow to avoid unnecessary tax risk.
Why This Matters
When your company makes payments, the IRS cares about two things:
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Who you’re paying
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Whether that income is subject to US tax
If you don’t properly document this, the IRS may treat the payment as taxable, which could mean up to 30% withholding.
The good news?
For most startups working with contractors abroad, compliance is straightforward.
Get the free Contractor Compliance Kit (templates included) →
Step 1: Collect Form W-8BEN
Before sending any payment, you should collect:
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W-8BEN (for individuals)
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W-8BEN-E (for companies)
This form confirms that your contractor is not a US person.
Without it, you don’t have proof, and that’s where risk comes in.
Step 2: Confirm Where the Work Is Performed
This is one of the most important (and often overlooked) points.
If services are performed:
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Outside the US → generally not subject to US tax
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Inside the US → may trigger withholding requirements
Most international contractors work remotely from their home country, which keeps things simple, but you should still document it.
Step 3: Use a Proper Contractor Agreement
A good contract isn’t just legal protection, it also supports your tax position.
At a minimum, your agreement should cover:
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Scope of work
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Payment terms
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Independent contractor status
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Tax responsibility
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Confirmation that services are performed outside the US
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IP ownership
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Confidentiality
This helps demonstrate that the relationship is structured correctly.
Step 4: Keep Documentation
If you’re ever asked to justify your payments, documentation is everything.
You should keep:
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Signed W-8BEN / W-8BEN-E
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Contractor agreement
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Invoices
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Proof of payment
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Evidence that services were performed outside the US
Think of this as your audit file.
Do You Need to File Form 1099?
No.
Forms like 1099-NEC apply only to US persons.
For non-US contractors, they generally do not apply.
The Most Common Mistake
The biggest issue we see is simple:
👉 Paying contractors before collecting the W-8BEN
It seems minor, but it creates unnecessary risk.
Best practice is to collect everything upfront before the first payment.
Final Thoughts
Working with international contractors doesn’t have to be complicated.
In most cases, staying compliant comes down to three things:
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Collect the right form
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Confirm where the work is performed
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Keep proper documentation
Do that, and you’re in a solid position.
Need Templates or Help Setting This Up?
If you need a contract template, invoice template, or a simple compliance checklist, we’ve put together resources specifically for startups.
Get the free Contractor Compliance Kit (templates included) →
And if you want to automate the whole process from collecting forms to organizing documentation that’s exactly what we’re building at TaxHero AI.
Need help automating contractor compliance?
Try TaxHero AI: taxhero.vc
Free tax calendar for startups: https://taxhero.vc/checkin
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