From the contractor’s viewpoint, they can become self-employed and pay necessary tax on their own. To work openly and legally, a freelancer needs to deep-dive into laws regulating their work and acquire necessary permits and statuses.
A freelance agreement serves as protection for both the contractor and the client and as a guarantee that they will receive money and completed projects respectively. The appropriate format is a service agreement. When drafting the document, you need to check if it agrees with your freelancer’s local labor regulations.
When working with a freelancer under a service agreement, the customer is not subject to traditional payroll costs, i.e. additional payments that employers normally make for their employees such as social insurance and medicare. The freelancer will do it themselves in their home country. To declare income earned through working with you, a contractor needs to:
- request a handover certificate signed after the project has been complete
- receive payment
- send a receipt to the customer
In some countries the law requires the foreign worker to reside in the same country as their client or employer. If it is not the case and the authorities get to know about it, then there appears a serious threat of fines or even suspension of operations. If the foreign worker is in the same place as their company, then the employer needs to notify the migration agency.