Contractor Agreement
A contractor agreement is the legal contract between a company and an independent contractor defining scope of work, payment terms, IP ownership, and termination conditions.
A contractor agreement (also called an independent contractor agreement or consulting agreement) is the foundational legal document for any contractor engagement. It establishes the working relationship as an independent contractor arrangement — not employment — which is critical for avoiding misclassification risk.
Key provisions include: scope of work and deliverables, payment terms and rates, intellectual property assignment, confidentiality obligations, termination conditions, non-compete/non-solicit clauses (where enforceable), data protection obligations, and governing law.
For international contractors, the agreement should address which country's law governs, how disputes are resolved, and that the contractor is responsible for their own taxes. Bitwage's contractor onboarding process includes agreement templates and ensures proper documentation is in place before first payment.
Contractor Agreement FAQ
Common questions about contractor agreement in the context of international payments.
At minimum: scope of work, payment terms (currency, frequency, method), IP assignment, confidentiality, termination clause, governing law, and a clear statement that the relationship is independent contractor (not employment). For tax compliance, pair it with a w8 ben form.
More Compliance & Tax Terms
Expand your knowledge of international payment terminology.
1099-NEC Filing
Form 1099-NEC is the IRS information return used to report payments of $600+ to non-employee service providers, required to be filed by January 31 each year.
AML (Anti-Money Laundering)
Anti-Money Laundering (AML) refers to the laws, regulations, and procedures designed to prevent criminals from disguising illegally obtained funds as legitimate income through financial systems.
BSA (Bank Secrecy Act)
The Bank Secrecy Act (BSA) is the primary US anti-money laundering law requiring financial institutions to assist government agencies in detecting and preventing money laundering.
Bank Secrecy Act (BSA) Compliance
The Bank Secrecy Act (BSA) is the primary US AML law requiring financial institutions to maintain records, file reports, and implement controls to detect and prevent financial crimes.
Beneficial Ownership
Beneficial ownership refers to identifying the natural persons who ultimately own or control a legal entity, a requirement for AML compliance when onboarding business customers.
CDD (Customer Due Diligence)
Customer Due Diligence (CDD) is the standard AML process of verifying customer identity, understanding their business, and assessing the risk of financial crime before and during a financial relationship.
CTR (Currency Transaction Report)
A Currency Transaction Report (CTR) is a mandatory filing submitted by financial institutions for cash transactions exceeding $10,000 in the United States.
Compliance Automation
Compliance automation uses software to handle KYC verification, sanctions screening, tax reporting, and regulatory monitoring — reducing manual compliance work.
Contractor Misclassification
Contractor misclassification occurs when a company treats a worker as an independent contractor when they should legally be classified as an employee.
Contractor vs Employee Classification
Contractor vs employee classification determines the legal employment relationship — affecting payroll taxes, benefits obligations, termination rights, and regulatory compliance.
Digital Services Tax (DST)
A digital services tax is a tax imposed by countries on revenue earned by large digital companies from activities within their jurisdiction.
Double Taxation
Double taxation occurs when the same income is taxed by two different jurisdictions — a common issue for international contractors and cross-border businesses.
E-Money License
An e-money license authorizes a company to issue electronic money — stored value that can be used for payments — under EU/EEA or UK regulatory frameworks.
EDD (Enhanced Due Diligence)
Enhanced Due Diligence (EDD) is an elevated level of AML scrutiny applied to high-risk customers, requiring deeper verification of identity, source of funds, and ongoing transaction monitoring.
FATF (Financial Action Task Force)
FATF is the intergovernmental body that sets global standards for anti-money laundering (AML) and counter-terrorist financing (CFT) policies, issuing country compliance ratings.
FinCEN
FinCEN (Financial Crimes Enforcement Network) is the US Treasury bureau that administers the Bank Secrecy Act and regulates money services businesses.
KYC / AML
KYC (Know Your Customer) and AML (Anti-Money Laundering) are regulatory compliance frameworks requiring financial institutions to verify customer identities and monitor for suspicious activity.
MSB (Money Services Business)
A Money Services Business (MSB) is a FinCEN-regulated category of non-bank financial institutions — including money transmitters, currency exchangers, and check cashers — that must register with FinCEN and comply with the Bank Secrecy Act.
Money Transmitter License
A money transmitter license is a state-level regulatory license required in the US for businesses that transfer money on behalf of others.
OFAC Screening
OFAC screening is the process of checking payment recipients against the US Treasury's Office of Foreign Assets Control sanctions lists before executing any transaction.
PEP (Politically Exposed Person)
A Politically Exposed Person (PEP) is an individual who holds or has held a prominent public function, requiring enhanced due diligence in financial transactions due to elevated corruption risk.
PSD2 (Payment Services Directive)
PSD2 is the EU regulation governing electronic payment services, requiring strong customer authentication and enabling open banking APIs.
Payment Compliance
Payment compliance encompasses the regulatory requirements for sending money internationally, including KYC, AML, sanctions screening, and reporting obligations.
Payroll Tax
Payroll taxes are taxes withheld from employee wages and paid by employers to fund Social Security, Medicare, unemployment, and other government programs.
SAR (Suspicious Activity Report)
A Suspicious Activity Report (SAR) is a mandatory report filed by financial institutions when they detect transactions that may indicate money laundering, fraud, or other financial crimes.
Sanctions Screening
Sanctions screening is the process of checking payment parties against government and international watchlists to prevent money transfers to prohibited individuals, entities, or countries.
Tax Treaty
A tax treaty (Double Taxation Agreement) is a bilateral agreement between two countries that determines how cross-border income is taxed to prevent double taxation.
Travel Rule (Crypto)
The Travel Rule requires crypto service providers to share sender and recipient information for transactions above certain thresholds, similar to bank wire reporting.
W-8BEN Form
Form W-8BEN is the IRS form non-US individuals complete to certify their foreign status and claim treaty benefits, reducing or eliminating US withholding on payments.
Withholding Tax (International)
Withholding tax is a tax deducted at source from payments to foreign contractors or vendors, typically required by the payer's country on cross-border payments.
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