Getting Paid By a Foreign Company: Quick Guide to Methods, Taxes, Laws

If you’re part of the fast-paced, exciting, and occasionally complex world of international business as a contractor or freelancer, you might be looking for the best way to get compensated by foreign companies.

With a solid grasp of regulations and knowledge of how exchange rates work, you can confidently conduct international business and reap its many advantages. Stick around and read our quickstart guide on getting paid by a foreign company.

We'll also mention how the Wise Business account is a great way to spend, send, and receive international payments.

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How to Get Paid by a Foreign Company: 4 Main Tips

This new, growing global workforce has given rise to plenty of methods and resources related to getting paid by overseas employers.

Although it might appear complicated at first, especially if you’re new to international work, getting familiar with the diverse currencies, fluctuating exchange rates, and various international laws means you’ll be receiving your well-deserved earnings in no time. Let’s take a look at these factors a little more closely.

1. Main Approaches to Getting Paid

Knowing the different ways that your clients can pay you is the first step. It's also helpful to know which options are the best for fees, sending time, and convenience.

Get Local Account Details

One of the best ways to get paid internationally is remarkably simple. You use a money services business provider, such as Wise Business, that provides you with local business account details. This feature allows you get paid like you had started a business account within that specific country.

As a result, your international clients can pay you as if you were any other business partner operating within that jurisdiction

Wise Business Account Details
Get paid like a local in global currencies with account details. Your clients can pay you like you're living in their country. A one-time fee gets you account details in USD, EUR, GBP, CAD, JPY, AUD, and more.

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International Money Order:

An international money orders can be purchased at a range of locations, including post offices, by paying the amount you want to send along with a fee.

Your clients will send you an international money order via post — yes, the mail — and then you can deposit the money once it arrives.

The international money order is still popular in Latin America, so if you're a US business dealing with Latin American clients, it might make sense for them to send you money this war. Of course, they don't move fast, and there's also a risk that your money order gets lost or stolen. It may make sense for you to opt for another method if possible.

International Wire Transfer:

An international wire transfer relies mostly on the SWIFT network — a complex and sometimes costly system that links together international banks. Despite its name, SWIFT transfers aren’t always particularly fast.

Depending on the route the money has to take, fees are charged to your transfer. Despite this, it remains a good option for you to get paid. It also gives your clients the change to use their own bank to pay you. Of course, they may want to opt for Wise Business, which charges a flat rate of $4.14 USD on wire transfers but that's up to them.

Here's what your client will see when using Wise Businesss to pay you:

Peer-to-Peer (P2P) Payments:

US businesses may know already be familiar with services, such as Zelle and Venmo, which have expanded to serve their needs in recent years. Still in the international landscape, P2P payments are growing. These types of payments give you the chance to receive payments without dealing with issues between service providers.

On an international scale, you can use service, such as Wise Business, to send or receive payments directly to other Wise users. Wise operates similar to Zelle and Venmo in this way, where you minimal fees on same currency transfers.

However, international transfers incur fees when you move your money between currencies. This problem will affect your clients when they try to pay you. That's why it's important to find a transparent provider that cares about showing you all the fees involved or offers the mid-market exchange rate.

Get your clients to pay you by link
Request payments online from customers — just generate an invoice, share your payment link, and get paid directly into your Wise account. Convert what you get at the mid-market rate, with no hidden fees.

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2. Local and Foreign Taxes

Taxes – they’re a dreaded requirement all around. But when it comes to dealing with international transactions, understanding local and foreign taxes doesn’t just let you know what your final paycheck will look like but also keeps you compliant locally and internationally.

Not only do you need to comply with your own local tax regulations, but you also need to be aware of the tax laws in the foreign country from which you're getting paid.

Here’s a quick checklist relating to taxes:

• Know your responsibilities in regard to local taxes: Depending on your home country, you might need to declare your international earnings as taxable income. Local tax authorities usually want to ensure that income from all sources is taxed fairly, which could include income from foreign companies.

• Know your responsibilities when it comes to foreign taxes: How taxes are handled can differ from one country to another. Some countries might be entitled to withhold a percentage of your payment as tax, known as withholding tax, while others might not.

• Brush up on double taxation treaties between countries: These agreements exist so that the same income won’t be taxed twice. If this type of treaty exists between your country and the foreign company's country, use it to your advantage.

• Are you a US Citizen or Resident? Keep in mind that those who aren’t classified as US Citizens or Residents will be subject to US graduated tax rates, special withholding rules, and federal income tax withholding and reporting by the foreign employer. Citizens and Residents won’t be subject to federal income tax withholding.¹

3. Laws in the Foreign Country

Other than compliance, there’s also the legal aspect of getting paid by a foreign company.

Let’s take a look at two main aspects of foreign business laws:

• International business law: Business laws differ from country to country, so it’s important to get familiar with the laws of the specific country where your employer operates. These laws might cover legal business structures, licenses, and permits, as well as worker rights and protections. Try researching government websites, or, better yet, consult an international business lawyer.

• Contracts and agreements: Before you start any work, make sure that you have a legally binding contract that is compliant with the laws of both countries. The contract should detail the terms of payment, any dispute resolution mechanisms, timelines, and the nature of your business relationship.

4. Exchange Rates

Once you’re compliant with taxes and laws, the only thing left to consider is navigating exchange rates. Exchange rates are known to fluctuate frequently, which means there is some risk involved when it comes to compensation. Within your payment agreement, you’ll usually receive money in your local currency or theirs.

If you choose to send an invoice in your local currency, your employer will assume the risk of any changes in the exchange rate, whereas if you invoice in the employer’s currency, you might be the one taking up that risk.

To get around these barriers, it’s helpful to keep a close watch on exchange rates and potentially try currency hedging. Currency hedging lets you enter a financial contract with a financial institution (this could be a bank or online financial platform) to exchange a specific amount of currency at a future date at a rate agreed upon in the present. This provides much greater financial stability rather than relying on the very unpredictable exchange rate.

Another useful way to navigate exchange rates is to set up a foreign currency account. These accounts allow you to hold money in the foreign currency of your choice and only exchange it when rates are most favorable. (Note: Lead into Wise - lets you hold a variety of currencies and open up local currency accounts)

Wise Business (Money Services Business Provider)

Wise will help you receive your hard-earned funds, keep your personal and business finances separate, track your cash flow, set budgets, and handle cross-currency transactions.

You won't have to worry about any useless fees with Wise with no minimum balance requirement or monthly fees required. Take full advantage of your side job with Wise.

Some features Wise Business users love
Receive Payments like a local: Businesses can pay a one-time fee for accounts details in global currencies, such as USD, EUR, GBP, CAD, so they can receive money without any additional fees
Account Software Integration: QuickBooks, FreshBooks, Xero, Sage, and Wave
Batch Payment Tools: Pay up to 1,000 invoice in one instance
An International Account: Hold 40+ currencies at once
Transparency: Wise Business is trying to get rid of all your business account fees

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No minimum balance requirement or monthly fees

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Sources

1 - IRS - Persons Employed by a Foreign Person (Note: One of the no-cite links, but it provides proper IRS information on taxes)
2 - Wise Trustpilot