Table of contents
- A General Enquiry Can Help You Prepare for International Contracting
- The Umbrella Company: Your Contracting Ally Abroad
- What is Independent Contracting?
- What are International Assignments?
- International Tax Management as a Contractor Working Abroad
- Global Compliance for International Contractors
- Work Permits
- FAQs about International Contracting
- Other topics related international contracting
A General Enquiry Can Help You Prepare for International Contracting
You don’t have to go it alone as you are preparing for international contracting, and Contractor Taxation has been assisting contractors like you for many years.
Once you have decided on a single country for your job search, or have client interest we are here for you.
You can contact us with the general enquiry form for a recommended umbrella company to assist with your contracting.
For first-time contractors, an umbrella company can be a real asset when dealing with a new client in a foreign country.
The Umbrella Company: Your Contracting Ally Abroad
An umbrella company can answer all your questions about work permits, taxes and client billing. They are well-familiar with all of the local regulations and business practices. This can begin before you leave home so that you arrive with an ally to turn to at every stage.
Contractor Taxation has a global network of umbrella companies that are ready to make your foreign contracting experience a success,
Other benefits of umbrella companies include:
- Manages all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
Here is one contractor’s experience with using an umbrella company for payments:
“I’m a freelance writer and I’ve been working for clients all over the world for the past few years. When I landed a contract with a client in the UK, I wasn’t sure how to go about getting paid. That’s when I came across the concept of an umbrella company. With the help of Contractor Taxation I found a reputable umbrella company that could handle all of my administrative and tax-related tasks. It was a bit of a learning curve at first, but the company provided excellent support and guidance throughout the process.
One of the things I appreciated most was the transparency of their pricing. They laid out all of the fees upfront, so there were no surprises or hidden costs. They also made sure to keep me informed about any tax implications, which gave me peace of mind knowing that I was complying with all local laws and regulations. Overall, using an umbrella company made it much easier for me to receive payments from my client in the UK. It saved me time and hassle, and allowed me to focus on what I do best – writing.”
What is Independent Contracting?
So what does it mean for you to be an independent contractor? Here is a definition to start with:
“An independent contractor is a person who undertakes a contract to perform services for specific clients under agreed terms. Contractors are normally paid on an ad hoc basis according to their output. This might be measured in time, productivity or deliverables.
Contractors may also be known as independent contractors, freelancers or consultants. They may work through a self-employed system, their company or an umbrella company.”
This underscores the reality of independent contracting: you are essentially self-employed and have to conduct yourself as a business. You must market your skills accordingly and manage all of your contractual and legal relationships. This includes complying with tax, immigration and business registration laws in the foreign country.
For this reason, new independent contractors will often work through a local umbrella company who can assist with setting up the contract, facilitating client payments and withholding taxes accurately.
What are International Assignments?
An international assignment is simply placement of a worker in a foreign location, where they are not a resident of the country. The worker can be a current employee, contractor or consultant, with essential skills to aid offshore operations.
If you are a contractor, it is possible that a client will assign you to an international position, which can be a boost to your career.
Traditionally, businesses would assign executives and key employees overseas for international expansion, but this removed valuable resources from domestic operations. It can also prove costly to the business, and unappealing to some employees who don’t want disruption in their personal life.
This is where international assignments of contractors can fill the void, where the worker may be available for short term projects, or willing to relocate for some period of time to gain foreign work experience.
International Tax Management as a Contractor Working Abroad
As an international contractor you face one unavoidable pain point when working abroad: international taxation. This is a common concern by contractors that make a general enquiry with Contractor Taxation. As our name implies we have the tax resources to help you.
The fact is that you are a citizen of one country working in a foreign jurisdiction, and both countries have a tax interest in your earnings. How can you possibly know how to calculate and apply the tax rates for a new country, as well as manage any home tax liability?
New contractors may be especially challenged by international tax management, if they were previously working as employees. This is where an international tax service can be of infinite value.
International tax services come in a variety of forms, depending on the type of client and complexity of the situation. For contractors, international taxation services can come from accountants, attorneys and contractor management/umbrella companies.
Contractor Taxation has tax experts in our network of umbrella companies ready to answer your international tax questions.
If you are a contractor seeking clients in foreign countries, there are distinct differences from working at home. You are probably aware of your home country’s tax obligations, business registration and self-employment rules. But all of this changes as soon as you cross borders to offer your services.
‘Compliance’ can seem like a daunting term, bringing images of stern, bureaucratic hurdles barring your success. But like most business regulations, there are fairly standardised steps to take. Here is a short checklist, and you can find more explanation in this article.
- Immigration – work permits
- Income Tax – withholding and filing
- Social Contributions
- Tax Residency
- Self-employment criteria
- Banking and finance
- Using a limited company
- Finding a regulated payment partner/umbrella company
Foreign nationals that work abroad typically need a work permit, unless you are an EU citizen working in a member country. Very simply, countries want control over who is working in-country as an expat.
The work permit is usually tied specifically to a client/employer. But some countries allow work permits to be sponsored by an umbrella company. An umbrella company gives you the option to change end-clients on the same permit, or for multiple clients.
FAQs about International Contracting
You can use the general enquiry form at the top of this page to contact us at Contractor Taxation. We will get back to you and answer all of your questions.
All taxes are levied by each country’s government, according to their own tax code. International tax only arises when there is some cross border transaction, trade or service that a country deems taxable.
There is no literal ‘international tax’ as there is no global taxing authority to impose it. For international contractors, taxes can be levied on earnings from services provided in foreign countries. This triggers international tax treaties and tax liability in one or more countries.
Assuming that a contractor wants to be assigned abroad, the client/company should make sure that the assignment is fully supported in the host country. This includes travel, accommodation, and pre-engagement of an umbrella company to secure work permits and set up payment channels for the contractor. Contractors can recommend that an umbrella company be used to make things simpler while working overseas.
This will usually depend on how the relationship was initiated, so if a contractor wants to use an umbrella company then it may be at their expense. But, in many cases the client can be approached with the idea, which has many benefits for them as well. They might agree to pay the umbrella company fees, or at least split them with the contractor.
They can be paid either as self-employed, via an umbrella company, or through their own limited company. One expat working in Spain decided to qualify for the self-employment work permit, and arranged with the client to get paid directly. She had a co-worker that used an umbrella company instead, so the client sent payments to the umbrella company who forwarded the after-tax amount to the contractor’s account.
If the country does not require PAYE for contractors, then you will have to calculate your own withholding or estimated payments. Of course, no one wants to make tax payments, but if you fail to make any estimated payments during the year, you might face some penalties. The best approach is to calculate your annual tax liability, and then make estimated payments based on that amount. If you don’t want to do your own withholding, you can always work through an umbrella company in the host country who will do it for you.
Although you must have a work permit for contracting abroad, you are not always the one responsible for the application. Your client or umbrella company as sponsor would apply on your behalf, using the documents you supply. If you are applying for a self-employment visa or digital nomad visa, those are entirely your responsibility.