Remote Work

Global | OECD releases clarity on permanent establishment for international remote workers

Summary

The OECD issued updated guidance on 18 November 2025 relating to permanent establishment treatment for international remote workers (i.e. individuals who work remotely from a home or another relevant place in a different country from their employer).

The guidance provides additional clarity around the corporate tax implications of working from private accommodation, a holiday home or hotel.  It reflects the need for international legislation and treaties to catch up with new global working patterns since the COVID-19 pandemic.

Whilst the update does indicate situations where a permanent establishment would not be created by virtue of a remote work arrangement, the updates do not provide certainty in all cases and there is no guarantee that all countries will adopt the recommendations.  In this article, we look at what this means practically for those managing policy and risk compliance for cross-border remote work programmes.

The detail

What does it mean for teams managing remote work programmes?  

What is a permanent establishment?

When an employee works in another country, there are certain situations where they can create a corporate tax presence (“permanent establishment”, or “PE”) in the destination, which may trigger additional tax and reporting obligations for their employer.  These can be administratively burdensome and costly to deal with.

Why does PE risk matter for remote working?

The risk of creating a PE and the resulting cost and administration of handling a PE is a significant concern for employers with international remote workers.  According to Vialto’s recent Mobility Agility survey, 48% of participating companies indicated that a relaxation of PE thresholds for remote workers would most significantly reduce challenges for operating a remote work programme.

The majority (62%) of employers that have a policy that permits employees to work in another country put guardrails in place to manage the risk of creating a PE (source:  Vialto’s Mobility Agility survey).  Policy guardrails to manage PE risk may include a case-by-case review of facts, additional requirements for certain higher risk job roles, or restriction on requests for certain higher risk destinations.

What are the main OECD changes?

The OECD changes provide greater certainty over when an individual’s home or other accommodation could become a “fixed place of business” for their employer, including:

• The arrangement needs to be “fixed” i.e. have a degree of permanence.
• The home or accommodation would not be considered a place of business if the individual worked there for less than 50% of their total working time over the course of any twelve-month period.
• If the individual works from the home or accommodation for more than 50% of their time, then the facts and circumstances around the arrangement would be considered. If there is no commercial reason for the individual to be based in that location, there would be no fixed place of business.  Examples of a “commercial reason” include (but are not limited to): where the employee is closer to customers or suppliers, they are closer to sites where they are required to work in-person, or if they are in a preferred time zone for customer interactions. Interestingly, allowing an individual to work from home remotely solely to retain the service of that employee, does not constitute a “commercial reason” for these purposes.
• If the individual is the only or main person delivering the services, the time limit exclusions may not apply and their presence in a location is more likely to create a PE. The OECD’s example is of a consultant who is the main provider of services.

What does it mean in practice?

The guidance is a welcome step towards better clarity on the PE treatment for international remote workers.  The recommendations relating to the 50% threshold of time are consistent with other global guidelines, for example, the EU Teleworker provisions for social security purposes.  This is helpful in moving towards a global consensus around time periods across the various risk areas and taxes.

However, there is still no guarantee that countries will adopt the OECD’s recommendations or certainty over how authorities will apply them in practice.  Similarly, the guidance covers examples of “fixed place of business”, it is still important to consider if the arrangement would trigger a PE in other ways e.g. by virtue of a dependent agent (where the employee routinely signs contracts or negotiates contractual terms) or a Service PE (where, in certain countries, combined days of presence by groups of employees are considered—including in India, which is the most popular destination country based on data from Vialto’s remote work assessment and tracking technology).  We expect further OECD guidance regarding dependent agent considerations in the future.

What actions should I take? 

1. Tracking is key: knowing which employees are working cross-border and tracking days  will allow identification and review of higher risk cases.
2. Review existing cases against the new guidance:  longer term cases (exceeding 50% of an employee’s working time) which also display a commercial benefit to the remote work arrangement may need to be revisited.
3. Create or update policy and governance: ensure you have a policy covering cross-border remote working, that is clearly communicated to the business and employees. Build clear processes and guidance for the business to manage remote work cases and aid stop/go decisions.
4. Assess and track broader risks: PE is just one of the potential risks. Continue to assess and track other risks including right to work, individual income tax, social security, payroll and employer reporting obligations, insurance, regulatory considerations, cyber security and personal safety.  Technology solutions can automate remote work risk assessments and tracking, giving management oversight and reducing manual involvement.

Contact us

If you’d like to discuss how these changes affect your international remote workers, please reach out to your Vialto Partners contact, or connect with:

Amanda McIntyre
Global lead Remote Work

Claire Pepper
EMEA lead Remote Work

Sanjita Samal
Americas lead Remote Work

Ben Neumann
APAC lead Remote Work

Louise Nicholls
Remote Work policy and governance

Kate Lind
Remote Work technology

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