The Asia-Pacific (APAC) region is booming and has one of the fastest-growing economies in the world. It's packed with talented professionals in tech, engineering, finance, creative industries, and more.
Hiring local freelance talent in APAC is a great way to tap into emerging markets like Vietnam, Indonesia, and Malaysia. With that said, hiring independent contractors in this region means navigating different regulations, currencies, and payment systems.
Key takeaways:
- Every APAC country has local laws determining whether a worker is considered a contractor or an employee.
- Employment laws governing contractor payments will depend on the APAC country where the contractor lives.
- Many payment methods are available to pay foreign contractors in the Asia-Pacific region, including some unique to that area, such as Alipay and Furikomi.
» Manage contracts, expenses, payments, and more — here’s how to do it with our contractor solution
Which Countries Are Part of the Asia-Pacific Region?
The APAC region encompasses a wide range of countries across East Asia, South Asia, Southeast Asia, and Oceania. Countries in the area include:
East Asia
- China
- Japan
- South Korea
- Taiwan
- Mongolia
- Hong Kong: Special Administrative Region (SAR) of China
- Macau: Special Administrative Region (SAR) of China
South Asia
- Afghanistan
- Bhutan
- India
- Pakistan
- Bangladesh
- Sri Lanka
- Nepal
- Maldives
Southeast Asia
Oceania
- Australia
- New Zealand
- Papua New Guinea
- Fiji
- Solomon Islands
- Vanuatu
- New Caledonia
- Samoa
- Tonga
- Kiribati
- Marshall Islands
- Palau
- Tuvalu
- Nauru
Regulations Governing Contractor Payments in APAC
The laws governing independent contractor payments in APAC differ significantly from country to country, from taxation and social security contributions to payment processing.
Worker Classification
Many countries in APAC have strict criteria for distinguishing between contractors and employees, including:
- China: Contractors must operate independently from the company employing them, with minimal oversight. Misclassification can lead to tax liabilities and the requirement to provide employee benefits.
- India: The 1970 Contract Labor Act outlines the legal framework for hiring independent contractors in India, who must register as self-employed and manage their own taxes.
- Japan: Contractors must exhibit independence in terms of work methods and schedules. Misclassifying a worker can lead to reclassification as an employee under the Labor Standards Act.
Taxation Regulations and Reporting
Tax laws vary across APAC countries, but independent contractors are typically (but not always) responsible for withholding and paying their taxes. Some examples of country-specific tax laws include:
- India: The Income Tax Act, 1961 requires companies to withhold tax at source (TDS) for contractor payments if they exceed a certain threshold.
- China: Businesses must withhold individual income tax (IIT) from contractor payments and report these to tax authorities.
- Japan: Companies may need to withhold a portion of the contractor's payment for taxes unless the contractor provides a valid tax exemption certificate.
- Australia: The Pay-As-You-Go (PAYG) withholding system may apply to contractors who do not provide an Australian Business Number (ABN).
- Indonesia: Companies must report payments made to contractors and may be required to withhold taxes based on the contractor's residency status.
Social Security Contributions
In most APAC countries, independent contractors are not entitled to employee benefits like social security, but there are exceptions:
- South Korea: Contractors may be required to contribute to national health insurance and pension schemes if certain thresholds are met.
- China: Companies working with contractors long-term may face scrutiny and potential reclassification if they avoid making social security contributions.
- Japan: Contractors are not entitled to social insurance unless they work under specific arrangements that mimic employee relationships.
Country-specific Payment Laws
Paying contractors in APAC isn't always straightforward — each country has specific rules governing taxes, currency exchange, and compliance. Here's a quick look at some key payment laws in major APAC markets:
- China: Companies must comply with strict currency exchange laws when paying contractors. Payments in foreign currency must often be converted to CNY, and detailed records maintained for reporting purposes.
- India: Contract payments must include applicable Goods and Services Tax (GST) if the contractor is registered for GST. Companies should ensure contractors provide valid invoices with GST details.
- Australia: Companies hiring contractors must ensure compliance with the "Personal Services Income" (PSI) rules, which can affect tax treatment for contractors operating as sole traders.
- Indonesia: Payments in foreign currency are generally restricted, and businesses must use the Indonesian Rupiah (IDR) for most transactions within the country.
Invoicing and Records Requirements
When hiring contractors in APAC, it's essential to ensure invoicing and record keeping comply with their country's laws. Some examples include:
- Japan: Invoices must comply with the Qualified Invoice System, which includes detailed payer and payee information.
- Australia: Contractors must issue tax-compliant invoices that include their ABN to avoid tax withholding.
- India: Contractors registered under the Goods and Services Tax (GST) must issue GST-compliant invoices.
Payment Processing Laws
Some countries in the APAC region even have specific laws governing how payments are processed:
- China: Payments to contractors must go through licensed payment systems, and companies must ensure compliance with anti-money laundering laws.
- South Korea: Businesses are required to use secure payment systems to comply with electronic transaction regulations.
- India: Unified Payments Interface (UPI) and bank transfer systems like NEFT or RTGS must follow strict regulatory guidelines under the Reserve Bank of India (RBI).
Does GDPR Apply to Contractor Payments in APAC?
While the General Data Protection Regulation (GDPR) primarily applies to the European Union, it can affect companies outside the EU if an APAC-based contractor works with data belonging to EU citizens.
As a result, companies should ensure payment platforms and data processing practices align with GDPR standards, even outside the EU.
Currencies in the APAC Region
As you would expect, given that APAC is such a vast region, there are numerous currencies that businesses must navigate when paying contractors.
Common currencies in APAC include:
- Chinese Yuan Renminbi (CNY)
- Japanese Yen (JPY)
- Indian Rupee (INR)
- Australian Dollar (AUD)
- Singapore Dollar (SGD)
- South Korean Won (KRW)
- Indonesian Rupiah (IDR)
- Philippine Peso (PHP)
- New Zealand Dollar (NZD)
Payment Options for APAC Contractors
Exchange rates and currency conversion fees can add complexity to contractor payments, so companies should evaluate payment platforms or services that offer competitive conversion rates and transparent fees. Some common payment options include:
Bank Transfers
Bank transfers are a secure and widely accepted way to pay contractors in APAC, particularly for contractors in countries with established banking systems. Contractors typically provide an IBAN (if applicable) or their local bank account details.
Contractors in Singapore, Australia, and New Zealand frequently use local bank transfers as they are fast, secure, and low-cost. NEFT (National Electronic Funds Transfer) or IMPS (Immediate Payment Service) are common in India.
However, bank transfers may come with high fees for international transfers, slower processing times, and potential regulatory hurdles, especially in countries with strict foreign exchange controls like China and Indonesia.
Digital Payment Platforms
Platforms such as PayPal, Payoneer, and Wise (formerly TransferWise) are popular in APAC for their ease of use and ability to handle multiple currencies.
On the plus side, they offer speed, convenience, and reduced currency conversion costs. However, some platforms may not be supported in smaller or less-developed countries.
SEPA and SWIFT Transfers
For international payments, companies often rely on SWIFT transfers. Countries like Australia and Singapore support SWIFT extensively. However, transfer fees for SWIFT can be high, making it less ideal for smaller payments.
Region-Specific Payment Methods
Some countries in APAC have unique payment systems:
- China: WeChat Pay and Alipay dominate as preferred payment methods, even for contractor payments.
- Japan: Furikomi (domestic bank transfers) is commonly used.
- India: UPI (Unified Payments Interface) is gaining traction for its speed and low cost.
You can learn more about other contractor payment methods in our article How to Pay International Contractors in 2025.
Pay Your APAC Contractors with RemoFirst
If you'd rather skip the hassle of learning all the legalities necessary to compliantly pay your APAC contractors, consider partnering with an Employer of Record (EOR) like RemoFirst. We ensure contractors are correctly classified, paid on time, and in their local currency.
In addition, RemoFirst assumes responsibility for any legally required tax withholdings and social security contributions, provides GDPR-compliant payment solutions, and manages currency exchanges and local banking requirements.
