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Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U.S. trade or business.
See IRS publication 519 - page 12 - Table 2-1. Summary of Source Rules for Income of Nonresident Aliens - as we see Business income from Personal services is sourced Where services performed - thus is IT services are performed in a foreign country - the compensation received for these services is not income from US sources and is not taxable in the US.Therefore - such compensation is not subject of reporting on 1099MISC and is not subject of withholding. If that is a contract with an individual related to your business - you deduct such expenses as contract labor as you suggested.You are expected to keep a proof that (1)the individual is a nonresident alien and (2) services were performed in a foreign country.Generally - as a payer - you are classified as a withholding agent. You need to collect a signed form W8BEN - www.irs.gov/pub/irs-pdf/fw8ben.pdf