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ARTICLE · 29 OCTOBER 2026

Remote Working And Permanent Establishment Risk: An Updated Guide

Travers Smith LLP
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The OECD has updated its guidance on when remote working arrangements create a permanent establishment for tax purposes, introducing a new 50% threshold test and a 'commercial reason' analysis. These changes fundamentally alter how businesses must evaluate their cross-border home working policies and could result in unexpected tax obligations in jurisdictions where employees work remotely.

United KingdomTax
Hannah Manning
Hannah Manning
Elena Rowlands
Elena Rowlands
Elissavet Grout
Elissavet Grout
Madeline Gowlett
Madeline Gowlett
Tom Margesson
Tom Margesson
Ian Zeider
Ian Zeider
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The OECD has published the full text of its updated model double tax convention (the Model Treaty), incorporating changes to its guidance, first announced in November 2025, on when a home office of a team member can generate a taxable presence of the foreign business for which they work. Businesses with remote workers will want to ascertain whether the relevant tax authorities will change their practices in line with the new guidance and, if so, confirm that their policies on remote working remain appropriate.

1. Background

Most countries will look to tax non-residents who have a threshold level of presence in their territory, referred to as a "permanent establishment" (PE), on the profits of that establishment. Many countries define PE in line with the OECD's approach, as set in the Model Treaty. Broadly, this provides for two types of PE: (i) a fixed place of business (such as an office), and (ii) a dependent agent that has sufficient authority over the business of the

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