The place where remote work is performed only constitutes a permanent establishment (“PE”) of the employer if it is of a fixed nature and is actually used to perform the enterprise’s business. As a rule, if an employee works from home in another country for less than 50% of their working time in any 12-month period, no PE arises.

If, however, the 50% threshold is reached or exceeded, then it is necessary to examine whether there is an economic reason for the employee’s presence in the other country, such as servicing the employer’s local clients, managing suppliers, performing activities that require on-site contact, or working in a time zone that facilitates the provision of services to specific clients.

The mere fact that an employee is abroad for personal reasons, or on incidental visits to foreign clients, does not result in the creation of a PE for the employer in that country.

This follows from amendments to the Commentary to the OECD Model Tax Convention, published on 19 November 2025. For the first time, this now addresses in detail cross-border remote work and its impact on the creation of a PE in the country where the work is performed. It should be remembered, however, that although the Commentary is widely recognised as guidance for the interpretation and application of double taxation treaties, it is not a source of binding law.

It is also worth noting that the creation of a PE in another country may entail corporate income tax (CIT) obligations for the employer in that country, including the need to attribute income to the PE, pay tax and file local tax returns.

Find more articles in PRO HR December 2025.