How to pay international contractors

Which payment methods work for contractors abroad?

There are five common ways to pay a contractor in another country. They differ most in how many banks touch the money, who pays for the currency conversion, and whether the contractor receives the exact amount on the invoice.

For recurring payments, a local transfer in the contractor's currency is usually the simplest choice where it exists. Keep SWIFT for countries or amounts a local route can't handle. Use a mobile wallet when that is where the contractor keeps their money, and offer stablecoin only when the contractor asks for it. Our guide to stablecoin payments covers the risks.

Vezmo Payouts is in early access. It pays people and suppliers in 150+ currencies by local bank transfer, UPI, SWIFT or mobile wallet where available.

You see the rate, the fee and the expected arrival before you confirm, and each payout is tracked. Vezmo is a financial technology company, not a bank, and its services are provided by regulated partners & Banks. Read how money is held.

Should you pay in USD or the contractor's currency?

Someone always pays to turn dollars into rupees, pesos or shillings. What matters is who pays, and whether you agreed it before the first invoice.

• Pay in USD. The contractor's bank converts the money at its own rate and may charge a fee to receive it. The contractor carries the conversion cost and any rate moves. Some contractors prefer this because they hold dollars or price their work in dollars.
• Pay in local currency. You see the rate when you pay, and you carry the conversion cost. The contractor receives the exact amount on the invoice, which makes their own bookkeeping easier.

Write three things into the contract: the invoice currency, who pays transfer fees, and which day's exchange rate applies if the invoice currency and the payment currency differ. For SWIFT wires, also agree who pays the sending, intermediary and receiving bank fees, and choose the matching charge option when you send.

What tax forms do US businesses collect from foreign contractors?

If your business is a US payer, ask every new foreign contractor for a tax form before the first payment. The IRS U.S. withholding agent FAQ says that for newly used foreign vendors, a valid Form W-8 should be required before any payment is made.

• Form W-8BEN: foreign individuals, such as a freelancer who invoices in their own name.
• Form W-8BEN-E: foreign entities, such as a contractor who invoices through their own company. The IRS says foreign entities use it to document their status for chapter 3 and chapter 4 purposes.
• Form W-9: US citizens and other US persons, even if they live abroad. The W-8BEN instructions tell a US citizen living outside the United States to use Form W-9 instead.

Why it matters: IRS Publication 515 says foreign persons who give you a valid Form W-8 are exempt from backup withholding and Form 1099 reporting. The form is your record that the payee is foreign, and it supports any treaty claim.

Where the work happens matters more than where the contractor lives. The IRS says the place where personal services are performed generally determines the source of the income, regardless of where the contract was made, where you pay, or where the payer lives. So pay for services performed entirely outside the US is generally not US-source income, and US withholding generally does not apply to it.

Form 1042-S comes in when the pay is US-source. If a contractor who is a nonresident individual performs services in the US, Publication 515 says you must withhold 30% unless a withholding agreement or final payment exemption applies. A contractor who claims a treaty exemption for that work gives you Form 8233 instead of a W-8BEN.

Payments subject to this withholding are reported on Form 1042-S and Form 1042. If only part of the work happens during a US trip, the IRS says the US-source share is usually allocated by the days worked in the US.

One trap to know: Publication 515 says a payment is treated as US-source if its source can't be determined when you pay, for example fees paid before the services are performed. Ask your tax adviser how this applies to retainers and advances.

What if your business is outside the US?

The IRS forms above are mainly a concern for US payers. If your business is registered in another country, your own country's rules decide whether you withhold tax on payments to foreign contractors, report those payments, or give your bank documents for outgoing transfers. Ask a local accountant before the first payment, and keep the records listed below either way.

Vezmo serves businesses registered in the US and many other countries, and checks which details your business can get when you apply. Business banking is in early access, and you can hold balances and convert between currencies once your account opens.

How do you keep a contractor from looking like an employee?

Calling someone a contractor in the agreement does not settle the question. The facts of the working relationship do. In the US, the IRS says all evidence of control and independence must be considered, and it groups that evidence into behavioral control, financial control and the type of relationship.

If you treat an employee as a contractor with no reasonable basis, the IRS says you may be held liable for employment taxes for that worker.

Where the contractor lives and works, local labor and tax law may apply its own test. Watch for these signs that a contractor relationship is drifting toward employment:

• You set their hours and tell them how to do the work, not only what to deliver.
• They work only for you, full time, with no end date.
• You pay a fixed monthly salary with paid leave or other employee-type benefits.
• You supply their equipment and reimburse expenses the way you would for staff.
• They manage your staff or present themselves as part of your company.

If a role looks like a job, ask an adviser about hiring through an employer of record or a local entity before you stretch a contractor agreement further.

What does a good monthly payout routine look like?

A fixed routine cuts late payments, duplicate payments and fraud. Here is a simple one for a small team that pays contractors once a month.

1. 1Set up each contractor onceSign the contract, collect the tax form (W-8BEN, W-8BEN-E or W-9 if you are a US payer) and save the payout details. Check that the account name matches the contractor or their company.
2. 2Set an invoice cutoffAsk for invoices by the same date each month, for example the 25th. Each invoice should show the period, the work, the amount and the currency.
3. 3Approve against the contractCheck hours or milestones against what you agreed. Above an amount you set, have a second person approve.
4. 4Verify any changed detailsIf a contractor sends new bank or wallet details, confirm the change by phone or another channel you already trust. Never confirm by replying to the message that asked for the change. This protects you if someone impersonates a contractor.
5. 5Fund and review the quoteMake sure your balance covers the whole run. Before you confirm, check the exchange rate, the fee and the expected arrival date for each payment.
6. 6Pay on a fixed dayPay on the same date each month. Put the invoice number in the payment reference so the contractor can match the payment to the invoice.
7. 7Confirm and reconcileMark each invoice paid, record the rate and fees, and follow up on any payment that has not arrived by its expected date.
8. 8Review once a yearReplace W-8 forms before they expire, recheck where each contractor works, and ask whether any role now looks like employment.

What records should you keep for each contractor?

Keep one folder per contractor. If a tax authority, auditor or bank asks about a payment, you want to answer from your files.

• The signed contract and any amendments.
• The tax form (W-8BEN, W-8BEN-E or W-9), with the date it was signed and the date it expires.
• Every invoice, with who approved it and when.
• Payment confirmations: amount sent, amount received, currency, exchange rate, fees, date and reference.
• Where the work was performed, by period, because US sourcing depends on it.
• Each change of bank or wallet details, and how you verified it.
• Notes on why the person is a contractor. The IRS tells businesses to document each factor used in reaching that decision.

Ask your accountant how long to keep these files, since tax authorities can ask about payments years after they were made. If you are on the other side, getting paid by clients abroad, see our guide to getting paid by US clients from abroad or Vezmo for freelancers.

Questions

Sources

Each one is the organization’s own page, checked 24 Oct 2026. Rules and fees change, so check them before you act.

• IRS: About Form W-8BEN
• IRS: Instructions for Form W-8BEN
• IRS: About Form W-8BEN-E
• IRS: About Form 1042-S
• IRS: Source of income (personal service income)
• IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
• IRS: U.S. withholding agent frequently asked questions
• IRS: Independent contractor (self-employed) or employee?

Vezmo is a financial technology company, not a bank. Banking, stablecoin and card services are provided by regulated partners & Banks. Last reviewed 24 Oct 2026.