This article was originally published by Jemima Owen-Jones on Deel.
Key takeaways
- Non-US citizens can work remotely for a US company from their home country or anywhere in the world if they have consent from the hiring company, follow local visa laws, and pay taxes in their country of tax residence.
- Regardless of worker classification, all non-US citizens working for US companies and living outside the US will pay taxes in their country of tax residence, even if they travel or temporarily live abroad.
- Working as a contractor can often be a more suitable work classification for digital nomads as you can adapt your working schedule as you see fit, which can be helpful when traveling through time zones. It also frees the company from navigating different employee benefits and tax laws as you move from country to country.
Working remotely for an American company while living outside the US as a non-US citizen is totally viable. However, there are a few legal and logistical factors to be aware of to ensure you’re complying with foreign jurisdictions.
Let’s look at five areas digital nomads and non-US citizens living abroad should understand when pursuing a remote job with a US company.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
1. Get consent from your employer and establish your worker classification
Not all companies are open to their international hires traveling and working remotely in another country. This may be an arbitrary preference of the US employers, or it may be for legal reasons.
You should share your desire to work remotely abroad early in the interview and hiring process. This will ensure you and the company are a good match for each other in advance. It will also give the company time to determine the appropriate worker classification.
Your worker classification is important when deciding to work remotely from another country as it will set out your working relationship with the US company.
The main two types of worker classifications are employees and independent contractors. When it comes to remote working while living abroad, working as an independent contractor has advantages.
Unlike full-time employees who must work according to a company-regulated schedule, independent contractors have much more freedom and independence over their work.
Countries each draw the line between contractor and employee in slightly different places. But generally, contractors decide how, when, and most importantly, where they complete a given project.
Should you decide one day to relocate to a country with an entirely different time zone, working as a contractor gives you the autonomy to adapt your working schedule as you see fit. This also frees the company from navigating different employee benefits and tax laws as you move from country to country.
If a US company already employs you, the employer could consider reclassifying you as an independent contractor. But be aware that the working relationship must also change to reflect this.
Suppose the company continues to treat you like an employee, such as controlling your work methods. In that case, the company will be subject to misclassification and could face penalties.
It’s also worth mentioning that independent contractors do not receive employee benefits and have different tax obligations to employees, which we will explain in the next section.
Employees are entitled to the same mandatory benefits they would receive in their home country.
2. File taxes with your country of tax residence and complete form W-8BEN when requested
Regardless of worker classification, all non-US citizens working for US companies will pay taxes in their country of tax residence, even if they’re traveling or temporarily abroad.
You only pay U.S. taxes if you earn US-sourced income while physically present in the country. If you work remotely from another country, your income isn’t US-sourced, thus, isn’t taxed in the US.
Both employees and contractors must pay taxes in their home country, which is typically determined by the 183 days taxation rule. This rule means a person residing in one country for over 183 days a year is considered a tax resident and should pay income taxes on their US-earned income.
Contractors are self-employed and must therefore file a self-assessment tax return to report their foreign-earned income to their local tax authority. Employees will have their taxes withheld and filed by the US employer to the employee’s local tax authority.
If you move around as a digital nomad, you pay taxes wherever you have the most residential ties. Depending on your worker status, you or your employer may need to file multiple tax returns if you qualify as a resident in multiple countries.
