Permanent Establishment And Remote Work: Updated OECD Guidance

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On November 19, 2025, the Organisation for Economic Co‑operation and Development ("OECD") released updates to the Model Tax Convention and its Commentary, introducing a new analytical framework for assessing when a remote employee's home office may constitute a "permanent establishment" ("PE") of their employer in another jurisdiction. These changes are particularly relevant for organizations with cross‑border remote or hybrid work arrangements.

The updated OECD commentary to Article 5 introduces a two‑part test to be used in determining whether a PE exists in remote work scenarios. Where both elements of the test are met, a PE will generally be considered to exist. Those elements are set out below: