Quick answer: No. A foreign contractor who isn’t a US person and does the work outside the US doesn’t fill out a W-9, and you don’t file a 1099 for them. You collect a W-8BEN (individuals) or W-8BEN-E (companies) before the first payment instead. Without a valid W-8 on file, US withholding rules can require you to hold back 30%. If they do the work while physically in the US, you’re in Form 1042-S territory. The form expires at the end of the third calendar year after it’s signed.
None of this is tax advice, just the plain-English version of the rules US businesses run into when they hire abroad. Confirm the specifics with your accountant or the IRS withholding-agent FAQ.
Most of the confusion here comes from one habit: treating every contractor like a US contractor. The forms are different, the filing is different, and the mistake that costs money (skipping the W-8) is the easiest one to make.
Do foreign contractors need a W-9 or a 1099?
No on both. The W-9 collects a US taxpayer ID, and the 1099-NEC reports payments to US persons. A non-US person performing services outside the US falls under neither. What they need to give you is a W-8BEN, which certifies their foreign status and is the document you keep on file to justify not withholding or filing a 1099.
The distinction matters because the 1099 system exists so the IRS can match what you paid to what a US taxpayer reports. A contractor in Manila or Mexico City isn’t a US taxpayer on that income, so there’s nothing to match. Sending them a 1099 anyway doesn’t get you in trouble by itself, but it usually means you also asked for a W-9, which means you never collected the W-8 you actually need.
There’s a second reason businesses get this wrong: their accounting or payroll software defaults to “collect W-9, file 1099” for every vendor. That’s a US-domestic assumption baked into the tooling, not a rule. If your tool can’t tag a contractor as a foreign person and store a W-8 instead, you’re going to be fixing this by hand every January.
What’s the difference between a W-9, W-8BEN and W-8BEN-E?
A W-9 is for US persons and collects a taxpayer ID number. A W-8BEN is for foreign individuals and certifies they aren’t US persons, plus any tax-treaty claim. A W-8BEN-E is the same certification for foreign entities (a company, partnership, or agency). You keep all three on file; none of them get sent to the IRS on their own.
| W-9 | W-8BEN | W-8BEN-E | |
|---|---|---|---|
| Who fills it out | US persons (citizens, residents, US entities) | Foreign individuals | Foreign entities (companies, partnerships) |
| What it certifies | US taxpayer status and TIN | Non-US status, treaty claim if any | Non-US status, entity type, treaty claim if any |
| What you file after paying | 1099-NEC or 1099-MISC | Nothing, if work was done outside the US | Nothing, if work was done outside the US |
| Withholding if missing | Backup withholding can apply | 30% withholding can apply | 30% withholding can apply |
| Expires? | No (until information changes) | End of the 3rd calendar year after signing | End of the 3rd calendar year after signing |
| Sent to the IRS? | No, kept on file | No, kept on file | No, kept on file |
Two practical notes. First, ask the contractor which they are before you send a form. A sole trader in Brazil is an individual (W-8BEN); a two-person studio registered as a company is an entity (W-8BEN-E), even if you only ever talk to one person. Second, the W-8BEN-E is long and most of it doesn’t apply to a small foreign services company. The parts that matter are identity, entity classification, and the certification. Your accountant can tell you which sections to point them to.
When do you have to withhold 30% from a foreign contractor?
If you don’t have a valid W-8 on file, US withholding rules can require you to withhold 30% of the payment to a foreign person. With a valid W-8BEN or W-8BEN-E on file, and the work performed outside the US, no withholding applies. That’s the whole reason to collect the form before money moves, not after.
Think of the W-8 as the switch. Form on file and work performed abroad: pay the full invoice. No form: the default is 30% withholding, and you’re the one on the hook for it as the withholding agent. The IRS FAQ linked above is the source most accountants will point you to on this.
This is where timing bites. If a contractor sends their first invoice on Friday and you’ve never asked for the W-8, the correct move is to get the form first and pay on Monday, not to pay and chase the form later. Collecting it late doesn’t retroactively fix payments you already made without it.
Treaty claims are a separate topic. Some contractors in treaty countries use the W-8BEN to claim a reduced rate on certain kinds of US-source income. For pure services performed abroad, that usually isn’t in play, because the income isn’t US-source in the first place. If a contractor asks about it, that’s a question for their tax advisor, not for you.
When does a foreign contractor get a 1042-S instead of a 1099?
When a foreign contractor performs the work while physically in the US, the payment can become US-source income, and reporting moves to Form 1042-S rather than a 1099. Withholding may apply too. If your contractor visited for an on-site sprint, a conference, or a client workshop and billed you for those days, flag it with your accountant.
The rule of thumb is location of the work, not location of the payment or the contractor’s home address. A designer in Lisbon who works from Lisbon is outside the US. The same designer working from your New York office for three weeks is doing US-source work for those three weeks, and those days can be reported differently from the rest of the year.
Most small businesses never trigger this. If your contractors stay in their own countries, you’re in the simple case. Just make sure your contract says where the work is performed, so there’s no ambiguity later.
How long is a W-8BEN valid for?
A W-8BEN or W-8BEN-E is valid from the date it’s signed until the last day of the third calendar year after that. A form signed on 15 March 2026 stays valid through 31 December 2029. It also stops being valid earlier if something on it changes, such as the contractor moving to the US or an entity changing its structure.
So you need two dates on file for every foreign contractor: the day they signed and the year it expires. Put the expiry in whatever system already reminds you about contract renewals. A lapsed W-8 puts you right back in the 30% default, and nobody notices until an audit or a year-end review.
A clean habit: when a contract renews, ask for a fresh W-8 at the same time. It’s a five-minute ask on renewal and a headache to chase three years later.
What should your payout platform store for each foreign contractor?
At minimum: the signed W-8 file, the signature date, the calculated expiry date, the contractor’s country of residence, whether they’re an individual or an entity, and where the work is performed. Add the payout details (currency, bank or wallet, and every payout record) so you can reconcile payments to the person and the form.
The checklist most finance teams end up building:
- The signed W-8BEN or W-8BEN-E, as a file, not a screenshot.
- Signature date and expiry date. The expiry drives your renewal reminder.
- Individual or entity, so you know which form applies and which name should appear on payouts.
- Country of tax residence, as stated on the form.
- Where the work is performed, ideally written into the contract. This is what separates the simple case from the 1042-S case.
- A note of any treaty claim on the form, even if it doesn’t apply to services performed abroad.
- Payout records with date, amount sent, currency delivered, and what the contractor actually received. If your payment provider can’t tell you the delivered amount, that gap shows up at reconciliation.
- Contract and invoices, linked to the contractor’s record, so an auditor can follow the money from agreement to payment.
Which tool holds this is up to you. Some contractor-of-record platforms collect the form for you; most payment tools don’t, and they shouldn’t be assumed to. Whoever collects it, the obligation to have it on file is yours as the payer.
How does Avvio for Business handle contractor payouts?
Avvio handles the payment, not the paperwork. Your business collects and stores the W-8 forms; Avvio moves the money. Payouts go out to 60+ currencies across 150+ countries and settle in seconds on local rails such as Pix in Brazil and SPEI in Mexico, with the rate, the fee, and the exact amount the contractor receives shown before you send.
We don’t collect tax forms on your behalf, and we won’t imply otherwise. What we do is make the payment side simple enough that the compliance side is the only thing left to think about:
- One balance, local delivery. Fund your account, then pay contractors in their own currency through their own domestic rails. A contractor in São Paulo gets reais through Pix; one in Mexico gets pesos through SPEI. No correspondent banks taking a slice on the way.
- The quote is the price. Every payout shows the rate, the fee, and what lands before you commit, so the delivered amount is there for your records.
- Dashboard or API. Finance teams use the dashboard; product teams use the REST API or the @avvio/payments Node SDK. Docs are at docs.avvio.xyz.
- The receivable side too. If your contractors invoice you through Avvio, receiving an invoice payment is free for them.
For the wider picture on rails and costs, our guide to paying international contractors covers the methods and fee stack, and the cross-border payout platform comparison covers who publishes pricing and who doesn’t.
Avvio is a financial technology company, not a bank. Payment services are provided by licensed partners, availability varies by jurisdiction, and nothing here is tax or legal advice.
Frequently asked questions
Do I need to send a 1099 to a foreign contractor? No, not for a non-US person who performed the work outside the US. Collect a W-8BEN (individual) or W-8BEN-E (entity) instead and keep it on file. If the contractor did the work while physically in the US, ask your accountant about Form 1042-S.
What if my foreign contractor refuses to fill out a W-8BEN? Then you don’t have proof of foreign status, and US withholding rules can require you to hold back 30%. Explain that the form is standard, isn’t sent to the IRS, and only certifies they aren’t a US person. Most refusals are misunderstandings about what the form does.
Does a W-8BEN need to be notarized or sent to the IRS? No. The contractor signs it and gives it to you. You keep it on file. It doesn’t get mailed to the IRS, and it doesn’t need notarization or a wet signature; an electronic signature is fine for most businesses, though check your own policy.
Can I pay a foreign contractor in USD and still skip the 1099? Yes. The currency you pay in has nothing to do with the 1099 rules. What matters is whether the contractor is a US person and where the work was performed. Paying in local currency often leaves more money with the contractor, which is a separate question.
How often should I ask for a new W-8BEN? At least every three years, since the form expires at the end of the third calendar year after signing, and sooner if anything on it changes. Tying the refresh to contract renewal is the easiest way to never miss it.
Does Avvio collect W-8 forms for me? No. Avvio handles the payout; your business collects and stores the W-8BEN or W-8BEN-E. Some contractor-of-record platforms do collect forms, at a per-contractor price. Either way, the obligation to have the form on file is the payer’s.
Once the W-8s are filed away, the payment side is the quick part: send your first payout from the dashboard and keep the delivered amount for your records, or wire it up through the developer docs. If you advise businesses on cross-border payments, there’s also a partner program.
