Home office: OECD Model Tax Convention Commentary changes the rules for the creation of a permanent establishment
As part of the long-awaited updated Commentary on the OECD Model Tax Convention, published at the end of 2025, significant changes were made to the criteria for the creation of a permanent establishment in situations where an employee performs their work from home (so-called in the form of home home office) in a state other than the state in which the employer is established.
As working from home has become an increasingly common part of the way many companies operate in recent years, the new interpretation of the OECD Model Tax Convention is a welcome development, providing more detailed and clearer guidance on when an employee’s home office may, and conversely may not, give rise to a permanent establishment abroad. Currently, the main criteria are the permanence of the place where the work is performed, the duration of working from home, and the business reason for working from home.
When does a permanent establishment arise in the case of working from home?
The introduction of these new criteria changes the way in which the existence of a permanent establishment arising from working in the form of a home office is assessed. For this reason, we recommend reviewing your current situation, as the conclusion regarding the existence of a permanent establishment may differ from an analysis prepared under the previous Commentary on the OECD Model Tax Convention.
We will be happy to assist you with updating the assessment of the existence of a permanent establishment.
