Permanent Establishment and Home Office: New OECD Rules from 2025
As part of the long-awaited update to the OECD Model Tax Convention Commentary, published at the end of 2025, significant changes have been introduced to the criteria for determining the existence of a permanent establishment in situations where employees work from home.
These changes are particularly relevant where an employee performs their work from a country different from the country of the employer’s residence.
When a home office may create a permanent establishment
Given the growing prevalence of remote work, the updated OECD guidance provides clearer rules on when a home office may or may not constitute a permanent establishment abroad.
The key criteria now include:
the permanence of the place of work,
the duration of remote work,
the business reason for working from home.
These factors must be assessed collectively when determining whether a home office creates a taxable presence in another jurisdiction.
Change in approach under the OECD Model Tax Convention
The introduction of these updated criteria results in a different approach to assessing permanent establishment risks compared to previous interpretations.
Greater emphasis is now placed on:
whether the home office is used on a continuous and regular basis,
the level of control or expectation from the employer,
whether the arrangement serves the business needs of the company.
As a result, a home office may in certain cases lead to the creation of a permanent establishment, even without a formal office or physical presence.
Why companies should reassess their situation
Due to the updated OECD interpretation, companies should reassess their current arrangements for remote work.
Existing analyses based on the previous Commentary may no longer be valid and could lead to different conclusions under the new rules.
Businesses should therefore:
review cross-border remote working arrangements,
assess potential permanent establishment risks,
evaluate related tax implications in foreign jurisdictions.
More information is available on the official website of the OECD:
https://www.oecd.org
How we can help
We will be happy to assist you with:
reassessing your permanent establishment exposure,
updating your existing analyses,
evaluating tax risks arising from cross-border home office arrangements.
Permanent establishment and home office: key takeaway
Home office: The OECD Model Tax Convention Commentary changes the rules for determining the existence of a permanent establishment.
Companies should take proactive steps to ensure compliance with the updated international tax framework.
