How to pay overseas employees?

If a company has overseas employees or even directors, how should they go about paying them?

Should the parent company set up a subsidiary, and then transfer some assets to pay the employee of the subsidiary, in order to create a favorable tax situation?

It would be simpler to just pay the overseas employee directly from the parent, but what are the tax implications of this?

Thanks for any help!

-Nick

Alternative: Use a payroll company. They basically hire the people, send you an invoice. THey earn a percentage of wage - but in return, they handle all the legal aspects, insurance forwarding etc.

This is a lot of overhead for 2-3 people in one country with all the paperwork, espcially if you are not there.

This is the eaiest way, and possibly also the cheapest for small setups. THe moment you open real offices - secreatry, landlines - it depends on where you and the other country are, but a subsidiary would be the normal proceesing.

One solution is for them to be contractors. You can go through an intermediary such as Odesk, which takes 10% off the top, but is the easiest way.

For someone on the board, that is trickier. If they're not being paid in equity alone, making them the head of the overseas office would be pretty easy in most countries. It means you'd be responsible for tracking all sales made in that country and paying the appropriate tax. But that's not the biggest deal in the world.

Paying employees directly in another country without any further setup is ilegal. How would you explain where is that money going without an invoice or receipt? More importantly, how is the people on the other end going to explain money coming from abroad just like that? What taxes are they paying?

One potential solution is have the foreign employes open a company in their current location and just bill you. Many countries have special laws for very small companies, that are easy to open, require very little to operate and so on.