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ARTICLE · 09 FEBRUARY 2026

Does Your Remote Employee's Home Office Create A Permanent Establishment?

The Organisation for Economic Co-operation and Development (the OECD) recently published an update to its Model Tax Convention on Income and on Capital...

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The Organisation for Economic Co-operation and Development (the OECD) recently published an update to its Model Tax Convention on Income and on Capital (the Model Tax Convention) which includes new, extensive commentary on when an employee's home office in one state may constitute a "permanent establishment" or "PE" of their employer resident in another state. The updated commentary provides a more comprehensive framework for determining the existence of a PE that reflects modern remote-work patterns that have become increasingly common over the past few years.

All employers are well-advised to consider whether the presence of a remote employee (or other controlled individual) in a particular state may give rise to a PE in that state in light of the new framework established by the OECD. This new framework suggests an evaluation of how much time the employee spends working at home (or at some other relevant place such as a cottage, holiday rental or home of a

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