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Employing a Foreigner Independent Contractors

Saginaw, MI |

If my company is hiring a foreigner as an independent contractor (hereinafter "IC") to do projects, do my company send a 1099-MISC to the foreigner IC at the end-of-the-year, if the foreigner IC is compensated for $600 or more?

*ADDITIONAL INFORMATION: The foreigner IC will be working with there own equipment and in there own country. All rights for projects will be my property of my company*

Attorney Answers 3

Posted

You might want to give consideration, too, to the legal interpretation of this arrangement in the country where the work will be performed.

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Asker

Posted

Attorney Willig, thank you for your advise. So does this mean I need to connect with a business or IP attorney within the foreigner country? I believe a suitable contract from a IP attorney shall be a defiant solution.

David Samuel Willig

David Samuel Willig

Posted

It might involve labor law in that country.

Asker

Posted

Attorney Willig, ok I will surely get in contact with a labor law attorney within the Philippines, which is the foreigner IC country.

Posted

Yes, there are also other forms the foreigner must fill out to indicate that US taxes do not need to be withheld. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Reporting-Payments-to-Independent-Contractors

See this link.

This answer is based on general legal principles only and is not intended to provide specific legal advice. This answer is for informational purposes only and does not constitute the formation of a lawyer-client relationship. Any reader of this answer should not make decisions based upon in without first directly consulting with an attorney

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Posted

Attorney Longman, thank you for the link and your guidance. On the link you provided I read IRS Publication 515, under "Withholding Under Specific Income" the category "Pay for Personal Performances Performed". Under "Services performed outside the United States" it states "Compensation paid to a nonresident alien (other than a resident of Puerto Rico, discussed later) for services performed outside the United States is not considered wages and is not subject to withholding." The foreigner independent contractor is from the Philippines, so therefore this means no withholding taxes will be necessary. * Attorney Longman, if you wish to find the selection within the category I just read, please visit http://www.irs.gov/publications/p515/ar02.html#en_US_2013_publink1000224965 and scroll down until you see "Services performed outside the United States" in bold text *

Posted

Few thoughts;

1. Does your contract have an arbitration clause, in case the contractor does not give you the IP rights or later tries to dispute ownership of the IP rights ?
2. Which country is this ? Some countries where the US does not have foreign relations or has cut off relations are very complicated to do business in. (for eg. Cuba)
3. If there is IP being generated - you should have a separate IP agreement, with a US choice of law clause, and a US based enforcement mechanism. Most countries that are signatories to the NY Convention recognize that IP rights are non-arbitrable - accordingly, it always helps to have separate agreements.

Of course, it comes down to how much money is involved - I would suggest that if you have more than $50000 (value of the IP) at stake - hire a lawyer. Not only does it ensure that everything goes smoothly - it also hedges your risk.

IRS CIRCULAR 230 DISCLOSURE: To comply with requirements imposed by the Department of the  Treasury,  we  inform  you  that  any  U.S.  tax  advice  contained  in  this  communication  (including  any attachments) is not intended or written by the practitioner to be used, and that it cannot be used by any taxpayer,  for  the  purpose  of  (i)  avoiding  penalties  that  may  be  imposed  on  the  taxpayer,  and  (ii) supporting the promotion or marketing of any transactions or matters addressed herein. 

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Asker

Posted

Attorney Sayta, to answer your thoughts... 1. No, it has a Term, Services, Rights Of Publisher, Power Of Attorney, Compensation, Accounting, Collaboration And Separate Agreements, Obligations Of Writer, Unique Service, Independent Status, Confidentiality, Successors And Assigns, Headings, Waiver, Assignment, Notices, Modification, Entire Agreement, Severability, and Governing Law clause but no Arbitration clause. 2. The foreigner Independent Contractor I'm looking at hiring lives in the Philippines, and will be doing the work within there own home.

Shaunak Hitesh Sayta

Shaunak Hitesh Sayta

Posted

Seems like you have a lot in place. I can look at the entire arrangement for you on a professional basis if you like. I do accept assignments on fixed fee.

Asker

Posted

Attorney Sayta, how nice and graceful of you. I thought due to the field my company is working in I thought only Entertainment Attorneys is the only one that can help me out? I guess I was proven wrong.

Shaunak Hitesh Sayta

Shaunak Hitesh Sayta

Posted

Yes. Your documents are fairly standard. I think any attorney generally doing contract law would be able to help you out. My email address is shaunak@sayta.com if you want to retain me - you can email me there.

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