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While return-to-office mandates continue to gather pace, remote working remains a common arrangement for companies with global workforces. Remote working may take many forms, such as:
- A short temporary period working overseas
- An extended period of work from another country
- Hiring an employee in another country prior to relocating them
- Hiring an employee to work full time in another country where the company does not have a presence.
These arrangements have historically posed concern that the individual’s presence in another country could create corporate tax exposure for the employing country, creating a “permanent establishment” (PE), a deemed corporate entity that could give rise to company registrations, tax filings and the levying of corporate tax on deemed profits.
The Organisation for Economic Cooperation and Development (OECD) is the leading global institution for the development of international tax rules and double tax treaties. On Nov. 19, 2025, it published updated commentary to the model double tax treaty that specifically addresses remote working arrangements where an individual works from a home office. The new commentary is designed to better reflect how companies are hiring, retaining and incentivizing talent across borders.
The previous commentary, published in 2017, considered whether a home office would create a PE, focusing on when a home office could be considered “at the disposal” of the employing country. This could occur where the home office was the employee’s main working location or with arrangements, where the company furnished the employee with office equipment, or if the office location was held out to be a company address for example.
The new commentary moves away from the concept of being “at the disposal” of the company, considering the facts and circumstances of the working arrangements and whether there is substance to contend a corporate presence should be considered to exist. The commentary makes it more challenging to create a PE where there is not a commercial, business reason for an employee to be based in the country of residence. Some guidance provisions of note from the commentary include:
- The mere contractual arrangements of a work location do not drive whether a home office is now considered "at the disposal of" the employing company. Previously a contract that stated an employee’s home was their working location posed risk that it would be deemed “at the disposal” of the employer and therefore constitute a PE.
- A home office may be at a personal home, or other temporary location (“relevant location”) such as rented accommodation, a family or friend’s home, or other fixed location an individual works at.
- A new safe harbor has been introduced that states that where an individual spends under 50% of working time at home or a relevant location, this should not constitute a PE.
- When an employee spends 50% or more of working time working in a home office, determining whether this location could constitute a PE will depend on whether there is a commercial reason for the employee to remotely work in that country.
- An employee’s presence in a country they are not employed in for business purposes may indicate PE exists and so the employee's role and responsibilities in that country continue to be important. For example, an individual working in sales in country or who is based there to actively manage client relationships could point towards the creation of a PE.
- Minor or incidental business activity in the country of the home office does not itself necessarily indicate the presence of a PE.
- Whether customers exist in the country of the home office does not drive the assessment of PE, particularly if the employee is not working with them.
While the commentary provides more certainty around corporate tax risk for employers addressing individual remote working cases, there is still uncertainty on working arrangements that have permanence and where there are multiple remote working employees.
A hiring strategy that recruits talent in another country with working from a home office may pose higher risk as the number of employees engaged in such a way increases. While a company may have no local business activity and so no economic integration into the country where the employees are hired, it is not clear that the new commentary will provide a safeguard where there are multiple remote working employees.
Ultimately however, the commentary is positive in providing employers with greater clarity and flexibility in designing talent strategy that can expand talent attraction across country borders without immediate risk of creating corporate tax exposure. Similarly, with many companies having implemented remote working policies, these can be revisited to determine whether the employer wishes to change them and offer more flexibility where risk should be lower.
It’s important for companies to recognize that the commentary is not binding and is only guidance on how a tax treaty may be interpreted and applied. Though with many European countries following the OECD commentary, this development should have an impact going forward on tax authority positions in assessing PE.
