New OECD Guidance On 'Permanent Establishment' And Overseas Employees

The issue of whether an individual employed in one jurisdiction but working in another creates a taxable presence (a "permanent establishment" or "PE") in the country in which the individual is working is a fundamental consideration for businesses. Below, we explore the new OECD guidance, together with some key takeaways for employers.

The new guidance at a glance

The OECD has issued updated commentary clarifying when cross‑border working may create a PE. This is an important development given the increase in non-standard working arrangements, such as the use of employers of record and overseas contractors, and the prevalence of working from an overseas "home".

As a summary, under this new guidance, the creation of a "fixed place of business" PE requires two criteria to be met: