For the last five years, “Permanent Establishment” has been the corporate world’s favorite ghost story. It is the phrase that stalled thousands of Work From Anywhere requests because tax teams worried that a single laptop in a Lisbon kitchen would create a corporate tax presence.
While the risk hasn’t vanished, the lights have been turned on.
Recent updates to the OECD Model Tax Convention Commentary have provided much-needed clarity on how cross-border remote work should be treated. We are moving away from ambiguity and toward a more structured way to assess risk.
Here is what the guidance actually says and why your remote work policy might need a refresh.
It is about clarity, not immunity
The core of the PE fear often stemmed from a misunderstanding of the “Fixed Place of Business” rule. For a home office to create a taxable presence for the company, it generally must be “at the disposal” of the enterprise.
The updated OECD commentary reinforces a critical distinction between what is required and what is convenient.
If an employer requires an individual to work from home because they do not provide an office, the risk is significantly higher. In that case, the home effectively becomes a company office.
However, if an office is available to the employee elsewhere but they choose to work remotely from another jurisdiction for their own convenience, the home is less likely to be considered “at the disposal” of the company.
The takeaway is that documentation is your best defense. Does your employment contract explicitly state that the remote arrangement is at the employee’s request? Does it note that a company office remains available to them?
The trap is the activity, not just the location
While the risk of the home office itself is often manageable for standard employees, the “Dependent Agent” risk is where things get tricky.
This is where the perceived safety of remote work often breaks down. Even if a home office isn’t a permanent office space, an employee can trigger a tax presence based on what they do.
Authorities look for employees who are habitually concluding contracts or playing the principal role in leading to the conclusion of contracts.
A developer coding in Spain is usually a low PE risk. A Sales Director negotiating deals in Spain is a high PE risk, even if they never invite a client to their home. The OECD guidance has not removed this risk. It remains a function of the employee’s authority, not just their GPS coordinates.
Moving from “No” to “Know”
The shift in OECD commentary doesn’t mean you can approve every request. It means you can stop saying “No” by default and start making decisions based on facts.
By aligning with the updated interpretation, companies can start to differentiate by role. You might create fast-track approvals for non-commercial roles like IT or HR while maintaining strict reviews for commercial roles like Sales or Executives.
You can also strengthen your documentation. Ensure approval letters explicitly confirm that the arrangement is employee-driven and does not change their authority to sign contracts.
No Free Pass
The OECD hasn’t given us a free pass. They have given us a better map to help global mobility, corporate tax and global payroll leaders navigate PE risks.
The companies that thrive will be those that stop treating PE as a mystery. Instead, they will start managing it as a defined, measurable operational risk.
P.S. If you found this helpful, you might enjoy these other articles we have on PE below:
The Latest OECD Updates & Analysis
- OECD Remote Work Updates: What You Need to Know: A deep dive into the specific commentary changes and how they impact corporate tax nexus.
- The Gaps in OECD Remote Work Guidance: Where the current guidance falls short and how companies should navigate the “gray areas” left behind.
- OECD Global Mobility Consultation: Insights from the public discussion on how tax treaties are evolving to meet the needs of a mobile workforce.
Practical Risk Management & Strategy
- The Remote Work PE Checklist: A step-by-step guide for tax and HR leaders to assess the risk of any remote work request.
- Running Towards PE Tax Risk: Why avoiding PE risk entirely might be costing your company more than managing it effectively.
- PE Risks for Global Mobility Leaders: A specialized look at how mobility teams can partner with tax departments to create seamless approval workflows.
- Permanent Establishment in a Work-From-Anywhere World: Our foundational guide on how the “fixed place of business” concept is being redefined by the laptop economy.
Donal Brady is Co-Founder and Head of Product at Work From Anywhere, a platform to help companies execute a successful workation policy. He has deep expertise and experience in the world of remote work having spent nearly twenty years working in finance leadership roles with global multinationals like PwC, before entering the world of global mobility with International SOS and then pivoting into the software industry with Accel-KKR backed Smart Communications. He walks the walk with Work From Anywhere, speaking 5 languages, having travelled to 65+ countries and worked in 10.
