B2B
Time & Materials
Best for Client
EU Company → US Company, billed hourly or daily
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- Does NOT file 1099 (W-8BEN-E documents foreign entity status)
- Does NOT withhold taxes — 0%, foreign company, non-US-source income
- Pays NO payroll taxes (0% Social Security, 0% Medicare)
- Records as foreign vendor / contractor expense
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Risk: Permanent Establishment (PE) if contractor regularly operates on US soil
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Zero Permanent Establishment (PE) if EU contractor works remote-only from EU
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- Issues invoice without VAT (export of services, B2B)
- Pays corporate tax under local EU rules (e.g. 10% flat in Bulgaria)
- Pays EU social security contributions
- Pays dividend tax when extracting profit (e.g. 5% in BG → ~14.5% effective combined rate)
- Full business expense deductibility before tax
- Pays NO US taxes (no US permanent establishment)
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★★★★★
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B2B
SOW / Fixed-Price
Best — Lowest Risk
EU Company → US Company, deliverable-based
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- Same as B2B T&M — no 1099, no withholding, no payroll taxes
- Requests W-8BEN-E from EU entity
- Pays per agreed milestone or deliverable — not per hour
- No control over how or when work is done — strong legal independence position
- Lowest worker-misclassification risk of all models — work-product focused, not labor-hours focused
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- Issues invoice per completed milestone or deliverable
- Strongest legal independence argument — no hour-by-hour oversight
- Bears project timeline and delivery risk
- Same tax structure as B2B T&M — full expense deductibility
- Pays NO US taxes
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★★★★★
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EOR
Employer of Record
Low Admin
US Client → EOR Platform → EU Contractor
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- No employer obligations — no HR, no payroll, no tax filings for contractor
- Pays a single monthly invoice to the EOR platform
- EOR handles all local compliance (payroll, taxes, social contributions) in contractor's country
- Fast onboarding — days, not weeks or months
- No W-8BEN required, no 1099 issued
- EOR service fee adds 15–30% overhead on top of contractor's compensation
- Platforms: Deel, Remote.com, Oyster HR, Papaya Global
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- Receives a compliant employment contract in home EU country
- EOR processes payroll, withholds income tax and social contributions
- Entitled to full local labor protections (sick leave, notice period, etc.)
- Loses tax efficiency of own company (salary PAYE vs. corporate + dividend)
- Cannot deduct business expenses
- Paid as employee — no invoice issued
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★★★★★
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Staff Augmentation
Agency Fee Burden
Via Agency
US Client → Staffing Agency → EU Contractor
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- Contracts with a staffing / IT consultancy (US or EU based)
- Agency is the legal employer or direct counterparty — client is not the employer
- Agency handles all compliance, payroll, taxes for the contractor
- Client selects and directs the talent without hiring overhead
- Useful for scaling teams quickly or accessing niche skills
- Agency markup typically 20–40% over contractor's net rate
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- Can subcontract via own company (preserves B2B tax efficiency) or be employed by the agency
- Agency takes a margin cut — lower effective rate than direct B2B
- Less direct negotiation power vs. direct client engagement
- If subcontracting via own company: same tax structure and deductibility as B2B
- Working conditions and rate governed by agency agreement
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★★★★★
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W-8BEN
Individual Freelancer
Moderate Risk
US Company → EU Individual directly
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- 1099-NEC applies only to US persons — for foreign individuals, request Form W-8BEN to document foreign status
- No withholding if services performed entirely outside the US (non-US-source income)
- No payroll taxes — no Social Security or Medicare obligations
- Risk: 30% withholding applies if any services are performed on US soil
- Risk: Worker misclassification — IRS may reclassify as employment if: regular set hours, single long-term client, client controls how & when work is done
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- Pays personal income tax in home EU country (e.g. 10% flat in Bulgaria)
- Pays EU social security contributions (as self-employed)
- Limited ability to deduct business expenses vs. own company
- Less tax-efficient than B2B company structure
- Pays NO US taxes for fully remote work (non-US-source income)
- Bulgaria–US tax treaty further reduces US-source income exposure if it arises
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★★★★★
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W-2
US Employment
High Burden
EU person becomes a full US employee
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Pays payroll taxes (employer share):
- 6.2% Social Security
- 1.45% Medicare
- Pays FUTA unemployment tax
- Files W-2 annually
- Must comply with US federal and state labor law
- Full employer responsibility — benefits, leave, termination rules
- Contractor must obtain US SSN or ITIN and hold a US bank account
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- Pays US federal income tax (graduated rates, up to 37%)
- Pays state income tax (varies by state, 0–13%)
- Pays Social Security (6.2%) and Medicare (1.45%) — employee share
- Entitled to US employee benefits if offered by employer
- Pays NO EU taxes while US-resident
- Must physically reside and work in the USA — loss of EU residency benefits
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★★★★★
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H-1B
Visa Sponsorship
Very High Burden
US Company sponsors EU person → relocation to USA
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- Pays all W-2 payroll taxes (same as above)
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Mandatory government H-1B fees:
- $460 I-129 filing fee
- $500 fraud prevention & detection fee
- $750–$1,500 ACWIA training fee
- $2,500 premium processing (optional — 15-day decision)
- Attorney fees: typically $3,000–$12,000 additional
- Must maintain LCA (Labor Condition Application) compliance
- Full legal responsibility for employee's immigration status
- Lottery-based — only ~30–35% of cap-subject applications are selected annually
- Minimum 12–18 months lead time from filing to start date
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- Pays US federal income tax (graduated, up to 37%)
- Pays state income tax (if applicable)
- Pays Social Security (6.2%) and Medicare (1.45%)
- Must physically live and work in the USA
- Visa is employer-tied — changing jobs requires new sponsorship
- Pays NO EU taxes while US-resident
- Loss of all EU residency rights and benefits during visa period
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★★★★★
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