The U.S. has its classification tests for a contractor (IRS Revenue Ruling 87-41), but it might be a surprise to many that foreign countries actually have stricter regulations. The Article: "Cracking the Classification Conundrum" by Donald C. Dowling Jr, in the December issue of Financial Executive magazine, highlights many important factors.
Many foreign countries have very specific language that must be written in the contract. For example, the contractor must have a permanent tax account number or registered as a self-employed consultant or individual entrepreneur are required in India, Israel and Russia.
In the Netherlands, Dutch law requires permission from the court to terminate an employee, including a misclassified contractor. Understanding the local laws is critical to the classification challenge.
Local counsel should be engaged to ensure the agreement lays the groundwork for true independence.
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