Remote Work And Permanent Establishments: Key Takeaways From The OECD 2025 Update

Key takeaways

• The definition of a permanent establishment in Article 5(1) of the OECD Model Tax Convention remains unchanged. However, the Commentary now contains detailed guidance on when a home office, work performed in second homes and other "relevant places" in the other State may constitute a permanent establishment.
• Three-step test for remote work PEs: in practice, the analysis focuses on (i) permanence of use, (ii) whether at least 50% of working time is spent in the other state, and (iii) whether there is a genuine commercial reason for the person to be there.
• Remote work granted for work-life balance, talent attraction or office-cost savings alone should generally not result in a PE, even if more than half of the work is performed from home.