The nonresident contractor needs to complete a Form W-8BEN which states that he is not a US person. This you keep with your records in case you are ever audited.
As a general rule, wages earned by nonresident aliens for services performed outside of the United States for any employer are foreign source income and therefore are not subject to reporting and withholding of U.S. federal income tax.
Foreign Source Income- Form 1042-S Reporting Not Required
Please see IRS Publication 515, Withholding of Tax on Nonresident Aliens.
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