How to do payroll taxes for foreign employees?

[Foley]

I'm looking into starting a web hosting business, but as far as company structuring and planning goes... I have a lot to do and learn. To those who are a US company but have remote employees in other countries, say the UK, India, Australia, etc... how do you pay them and claim it come tax time?

 

[trewq]

Talk to your accountant for the best solution for your situation.

 

[TheLinuxBug]

You don't.  In most cases you you hire them as an Independent Contractor then provide them with a 1099 (well in the US) and they pay their own taxes.  Hiring international people as actual employees can get a bit more costly and I am sure takes a lot more doing tax wise.  

You may wish to review the following: http://hrhorizons.nacubo.org/newsletter/past-issues/volume-7-issue-1/hiring-independent-contractors-abroad.html

Along with that, do what @trewq said and contact your accountant for more information as it pertains to your own company.

Cheers!

 

[XFS_Duke]

^^^ What he said. A IC is the best way to hire people. No costs for you and they're responsible for their own taxes.

 

[splitice]

Seconding what XFS_Duke said. Just be sure you get a proper invoice from them for every payment and that you keep it for the required time (check your countries tax authorities website for a start).

I would strongly recommend talking to an accountant, their advice is invaluable. If you cant afford an accountant, at-least speak to a book keeper. Although not licensed (or often trained), their advice is often good / right.

 

[NickM]

Trying to call an actual employee an independent contractor is a good way to get the IRS on your ass.  Source: a former employer of mine who tried to claim I was an independent contractor when I was an employee, and ended up losing his business because of it.

 

[qps]

Agree with @NickM - do not try to call an employee an independent contractor.  It's best to consult with an accountant.

 

[splitice]

Consider this:

Do you give your employee benifits, who pays for tools, office space etc. Additionally who handles the business aspect (are you creating the invoice for them? Thats a no-no). etc

I suspect for most hosting companies, their staff would fall under the independent contractor category. They may even work for multiple companies, or do part-time work in addition.

In Australia there is even a decision making tool for this question. A quick google reveals plenty of resources on the matter for other countries.

 

[NullMind]

However you do it, just don't overlook another few important pieces, NDA, IP and Non-Compete agreements, it's easy to overlook those with a remote employee and then later on find yourself in real trouble.

Carlos