Remote working from abroad and permanent establishments: the OECD’s guidance
In this respect, on 30 September, the updated Commentary on the OECD Model Tax Convention was published. It incorporates the significant amendments approved in November 2025 on cross-border remote work and permanent establishment.
The guidance previously in place had been developed when performing work from abroad was a far more marginal occurrence. It therefore needed updating to reflect the widespread use of remote working, which in many cases is now a structural feature of how work is organised rather than a merely occasional arrangement.
The key issue is under what conditions an employee who habitually works from their home, or from another private location, in a State other than the one in which the employer is established may create a permanent establishment in that State.
This is the issue addressed by the new guidance in the Commentary on Article 5. It introduces a more nuanced analysis based on two factors in particular: the amount of time the employee works from the location in the other State, and whether there is a commercial reason for the work to be carried out from that location.
More specifically, where the employee works from their home, or from another location in the other State, for less than 50 per cent of their total working time over any twelve-month period, that location should generally not be regarded as a place of business of the employer.
Exceeding the 50 per cent threshold does not, however, automatically give rise to a permanent establishment. It must also be determined whether the employee's presence in the other State serves a commercial reason. Examples include interacting with local customers or suppliers, or carrying out activities that require a physical presence in that territory.
The new OECD guidance therefore appears to move towards an increasingly substance-based approach to determining whether a permanent establishment exists. What matters is not only how much time the employee spends in the other State, but also the role their presence there plays in relation to the enterprise's business.
As cross-border remote working continues to grow, this approach is particularly significant for businesses and for how they manage the international mobility of their workforce.
