Abstract

This article examines the 2025 Update to the OECD Model Tax Convention Commentaries on Article 5 and its guidance on when cross-border remote working arrangements may result in a permanent establishment (PE). The OECD has introduced a structured framework for assessing whether a home office or other remote location constitutes a fixed place of business PE, centred on a two-stage inquiry involving a time-based indicator and a commercial nexus analysis. The article considers the significance of the OECD’s indication that a place from which an individual works for less than 50% of their working time over a 12-month period will generally not constitute a place of business, while emphasising that the threshold is not a statutory safe harbour and does not, by itself, determine the PE outcome. The article analyses the OECD’s distinction between remote working arrangements motivated by personal preference and those that serve a commercial purpose for the enterprise. Particular attention is given to the concept of a ‘commercial reason’ for an individual’s presence in a jurisdiction and the circumstances in which remote work facilitates the business of the enterprise in that State. The article further examines the OECD’s distinction between employees carrying on the business of an enterprise and individuals who effectively constitute the enterprise itself, highlighting the different PE consequences that may follow from otherwise similar working arrangements. The article argues that, while the 2025 Update provides welcome guidance on fixed place of business PEs arising from remote work, significant areas of uncertainty remain. The guidance does not alter the application of other PE rules, including dependent agent PEs, which in many cross-border remote working arrangements may present a greater risk than the fixed place of business analysis. The article concludes that businesses should avoid relying solely on the new framework and should continue to undertake a comprehensive PE analysis that considers the broader treaty context, the functions performed by remote workers, and the commercial realities of each arrangement.