Hiring Employees Abroad: How to Structure Remote Work Legally and Minimize Legal Risks

If someone on your team lives and works outside Uzbekistan, simply keeping their existing employment contract in place and continuing to pay their salary is not enough. You need to check the laws of the country where the person actually works, choose the appropriate engagement model, assess tax and social security obligations, and properly address data transfers and intellectual property rights. Legally structuring remote work depends not only on the employee's citizenship, but also on their actual place of work, tax residency, and the nature of their relationship with your company.

This is particularly relevant for IT companies. Your software developer might be based in Georgia, your designer in Turkey, and your product manager in the UAE, while your legal entity and core business operations remain in Uzbekistan.

What founders need to know

• Do not confuse citizenship with tax residency. A foreign national is not necessarily a tax non-resident, and an Uzbek citizen working abroad does not necessarily retain their previous tax status.
• Remote work does not eliminate local legal requirements. The country where the work is physically performed may impose mandatory rules governing employment relationships.
• Choose your engagement model before work begins. An employment agreement, an independent contractor agreement, and hiring through a local employer have different legal and tax consequences.
• Protect intellectual property and personal data. This is especially important when employees have access to source code, customer information, and internal business systems.

1. Why Hiring an Employee Abroad Is a Separate Legal Scenario

Consider this example: an Uzbek startup hires a software developer who permanently lives in Poland. The company pays the developer from Tashkent, their manager assigns tasks from Uzbekistan, and the source code is stored in the company's Git repository.

From a product and operational perspective, everything seems straightforward. Legally, however, several questions arise:

• Which country's employment laws govern the relationship?
• Where do tax and social security obligations arise?
• Does the company need to register in the employee's country or engage a local employer?
• Who owns the software and other intellectual property created by the employee?
• Can personal data be transferred outside Uzbekistan?

One important point: choosing Uzbek law as the governing law of an agreement does not automatically prevent mandatory foreign laws from applying. For example, the employee's country of residence may impose minimum employment protections, working-time requirements, statutory leave entitlements, and restrictions on termination.

That is why I recommend starting with the legal structure, not with drafting the contract.

2. Choosing the Right Remote Employment Model

In practice, there are several common approaches. There is no universal solution: the right choice depends on the country, the expected duration of the arrangement, the employee's responsibilities, and the degree of control exercised by the company.

An important point: you cannot simply label someone an independent contractor to avoid employment obligations. If your company sets their working hours, supervises how they perform their tasks, provides ongoing instructions, and integrates them into its organizational structure, local authorities may classify the relationship as employment. What matters is the substance of the working relationship, not just the title of the document.

3. Employment Agreements and Hiring Employees Abroad

If you choose an employment relationship, the agreement should reflect how the work is actually organized.

I recommend addressing the following points separately:

• Place of work. Specify the country and the agreed remote-working arrangement. Avoid allowing employees to work from any jurisdiction without prior approval.
• Role and responsibilities. Define the position, duties, expected deliverables, and procedures for assigning tasks.
• Working hours. Account for time zones, availability for team collaboration, time-recording procedures, and any mandatory restrictions under local law.
• Compensation. Specify the payment currency, frequency, payment method, and arrangements for reimbursing equipment, internet, and other work-related expenses.
• Leave and absences. Establish procedures for notifying the company about absences, requesting leave, and reporting temporary incapacity, while respecting mandatory protections in the country where the employee works.
• Termination. Set out the grounds and procedure for termination, notice requirements, and the handover of work materials without limiting the employee's mandatory legal rights.

Pay particular attention to governing law and dispute resolution. These provisions should reflect the actual structure of the relationship and must not create the false impression that a contractual choice-of-law clause can override mandatory employment rules in another country.

If a foreign national works physically within Uzbekistan, immigration and work authorization requirements must be assessed separately. Uzbek legislation provides for confirmation of the right to work for certain categories of foreign nationals. This is a different legal scenario and should not automatically be applied to someone performing their work entirely from abroad.

4. Non-Resident Employees: Taxes and Payments

One of the most common mistakes founders make is assuming that if an employee is based abroad, the Uzbek company is automatically free from tax obligations.

In practice, you need to distinguish between three separate issues:

First: the individual's tax residency. Tax residency is determined under the applicable country's rules. Citizenship, registered address, and actual place of residence may all have different legal significance.

Second: the source of income. You need to establish where the work is physically performed and how the relevant jurisdiction classifies the resulting income. In Uzbekistan, the taxation of income received by foreign individuals also depends on whether they qualify as residents or non-residents and whether the income is considered Uzbekistan-source income. These principles are explained on the official legal information portal Advice.adliya.uz.

Third: international tax treaties. If Uzbekistan has a double taxation agreement with the country where the employee lives, that treaty may affect how taxing rights are allocated and what supporting documentation must be provided.

For your finance team, this means that before making the first payment, you should verify the employee's tax residency, the legal classification of the income, any withholding or tax-agent obligations, and potential liabilities in the foreign jurisdiction.

Do not overlook the risk of creating a permanent establishment. If a remote employee abroad has authority to conclude contracts on behalf of your company or effectively manages a substantial part of its business, this could trigger additional tax consequences, depending on the circumstances and the applicable international tax treaty.

Do not apply one country's tax rates or rules to every employee. Specific rates, thresholds, procedures, and deadlines must be verified as of the relevant date.

5. Intellectual Property and Personal Data Protection

For IT companies, this is one of the most frequently underestimated areas of legal risk.

Imagine that a developer based in another country writes part of your application. You pay them monthly, the code is stored on GitHub, and the project belongs to your Uzbek startup. Does that automatically mean your company has acquired all the necessary rights to the work?

Not necessarily.

Your contractual documentation should expressly address:

• ownership and assignment of exclusive economic intellectual property rights in all deliverables created during the engagement;
• procedures for transferring source code, technical documentation, and other development materials;
• rules governing the use of third-party libraries and open-source components;
• confidentiality obligations and restrictions on unauthorized use or disclosure of commercially sensitive information;
• obligations to return equipment, revoke access credentials, and hand over corporate materials when the engagement ends.

If the employee uses AI tools, you should also define which information may be uploaded to external services and who is responsible for reviewing and validating AI-generated outputs.

Personal data protection is another critical issue. Uzbek legislation regulates the cross-border transfer of personal data. In particular, the applicable rules establish conditions for transferring data to foreign countries, including requirements relating to adequate protection and certain other statutory grounds. You should verify the current requirements against the latest version of the Law on Personal Data.

If your remote employee has access to customer databases, user information, or internal HR systems, review not only the contract but also the actual access architecture, data storage arrangements, and cloud services being used.

6. What to Do This Week: A Practical Checklist

Before hiring your first international remote employee, I would recommend that you work through the following steps:

• [ ] Confirm the employee's country of actual residence and work.
• [ ] Verify their tax residency and immigration status.
• [ ] Determine whether an employment agreement or an independent contractor arrangement is appropriate.
• [ ] Review the mandatory employment laws of the country where the work will be performed.
• [ ] Assess the company's tax obligations and potential permanent establishment exposure.
• [ ] Prepare an agreement covering confidentiality and intellectual property ownership and assignment.
• [ ] Verify the legal requirements for cross-border transfers of personal data.
• [ ] Configure access permissions, information security controls, and employee offboarding or project handover procedures.

You do not necessarily need to establish a complex international legal structure just to engage one specialist. But you do need to understand the consequences of your chosen model before the company starts making regular payments.

7. Frequently Asked Questions About Hiring Remote Employees Abroad

Can an Uzbek citizen work remotely from another country under an Uzbek employment agreement?

Potentially, yes. However, the arrangement must be assessed against the laws of the country where the work is physically performed, the terms of the agreement, the individual's tax residency, and any applicable international treaties. Having an Uzbek employment agreement alone does not automatically eliminate foreign legal obligations.

Does a foreign employee have to be hired through a local company?

Not necessarily. Depending on the country and the nature of the work, possible arrangements include direct employment by a foreign employer, local employment through an Employer of Record (EOR), or engagement as an independent contractor. The appropriate structure should be selected after reviewing local requirements.

Can a non-resident employee receive their salary from Uzbekistan?

Yes. Payment from Uzbekistan is not, by itself, prohibited. However, you need to determine the tax implications in both jurisdictions and ensure that the payment is supported by the correct contractual and accounting documentation.

Can an employment agreement be replaced with an independent contractor agreement?

Only if the actual relationship genuinely qualifies as independent service provision. Simply replacing one document with another does not protect the company against worker misclassification risks.

Who owns software code created by a remote employee?

That depends on the applicable law, the author's legal status, the contractual terms, and the nature of the work created. Intellectual property ownership and assignment must therefore be addressed expressly and correctly rather than relying solely on the fact that compensation has been paid.

Conclusion

A remote employee working abroad is not simply another address in your HR system. It is a distinct legal arrangement involving employment law, taxation, intellectual property, personal data protection, and the company's international compliance obligations.

My advice to founders is straightforward: do not choose an engagement model based solely on the lowest upfront cost. What you save today by avoiding a properly structured arrangement can turn into tax disputes, employment claims, or problems with ownership of your product tomorrow.

At Pactum, we help businesses build the legal infrastructure needed by IT companies and startups. Our work ranges from employment and contractor agreements to intellectual property protection and ongoing legal support for digital products.

If you are planning to hire an international team or already work with remote professionals based in other countries, book a consultation with Pactum. We will review your engagement model and help determine how to structure it in a legally sound way.

*This article is provided for general informational purposes only and does not constitute individualized legal advice.*