Startups that allow for remote working

Are there many startups that have the necessary setup for internationally located employees to work remotely? Please provide examples of such companies or websites where such lists could be found. How do these employers address pay and taxation related matters (assuming the employees work out of their home countries and do not have work permits in the country that the employer is located)? Do startups have legal exemptions or special privileges in this matter as opposed to publicly listed companies etc.?

There is a company called 37 Signals that has managed to grow successfully through remote working. How 'remote' their work is, is a subjective question (but after some review, there exists people that work for this company full-time from home). Here is their website:

http://37signals.com/

How do these employers address pay and taxation related matters
(assuming the employees work out of their home countries and do not
have work permits in the country that the employer is located)?

The most common way this is done is by transferring the entire salary over to the employee and letting them handle the tax matters on their own. Tax matters are too complex for a company using remote employees from many countries and this could drain resources, so companies would simply transfer over the entire salary. Also, it is worth pointing out that remote employees tend to lose out on things like dental/medical insurance and retirement plans like the 401k (found in the USA). This doesn't prevent them from putting their money into their own retirement funds, etc.

Do startups have legal exemptions or special privileges in this matter
as opposed to publicly listed companies etc.?

Labour laws can generally be complex in most countries, so a definitive answer can only be given by a lawyer that has some knowledge in labour law in your country.

However, from the point of view of startups, normally they only get incentives through tax or if they create 'local' jobs.

The comparison between public companies and startups isn't one that can be answered, as public companies have a vast amount of laws applied to them that private companies don't. A better comparison would be between stable private companies and startups, and the only way to tell if there is some special privilege or not is to review some of the laws related to this. Generally though, I don't think there would be any, unless you were creating local jobs (even if they were remote but still local).

I haven't read this book, but it seems to deal with this aspect. It is written by the founders of the 37 Signals company:

http://37signals.com/remote