KPMG Survey: Remote working exposes companies to the risk of establishing a permanent establishment

Use of the OECD Commentary in domestic legal systems

According to a KPMG survey across 63 jurisdictions, approximately 68% of countries use the Commentary on the OECD Model Tax Convention as a guide when assessing the creation of a domestic permanent establishment – whether directly in law or through administrative practice and case law. In the remaining 32% of countries, however, the Commentary does not play a significant role, for example where local rules and definitions of a permanent establishment are broader or are based more on the UN Model Convention.

Following the latest update to the OECD Commentary in 2025, only a small number of countries have so far publicly confirmed that they will also take these changes into account for domestic permanent establishments (e.g. Austria, Croatia, Denmark, Malta, Hong Kong). The United Kingdom has already updated its guidelines and views the changes as a clarification of existing principles, not as a fundamental change. Conversely, some countries (e.g. the Czech Republic, India, Israel, Malaysia, Nigeria) have expressed formal reservations regarding the sections relating to remote working.

New time test for working from home and the risk of a permanent establishment

A key new feature in the 2025 Commentary is the introduction of a time test to assess whether working from home in another country may constitute a so-called ‘fixed place of business’. As a general rule, a home workspace will not be considered a permanent establishment if the employee uses it for less than 50% of their working time over a 12-month period. If the 50% threshold is exceeded, the focus is on whether there is a business reason why the employee should work from that particular country (e.g. serving local customers). The OECD emphasises that this is an indicator, not an automatic ‘safe zone’ – an individual factual analysis is always required.

Tax treaties and the temporal relevance of the Commentary

The survey also shows that there is no uniform approach to the use of updated versions of the Commentary when interpreting tax treaties. Approximately 17% of jurisdictions apply a dynamic approach (taking into account the latest Commentary), 14% follow the version in force at the time the treaty was concluded, and 27% adopt a conditional stance – they will use the newer Commentary if they consider the changes to be clarifying rather than substantive. Other countries have not yet indicated how they will apply these rules.

The practical significance of the 50% test

Although the 50% threshold is seen as an important guide, only a minority of countries regard it as a genuine safe harbour. According to responses from KPMG member firms, in most jurisdictions a comprehensive analysis of the facts and circumstances of the specific arrangement will continue to be decisive, rather than simply the amount of time spent working from home abroad.

The survey findings highlight the need for a systematic approach to managing the risks associated with remote working. Multinational groups should regularly review their remote working policies, monitor local tax administration practices and continuously assess the risks of establishing a permanent establishment . At the same time, it is also necessary to take into account related obligations in the areas of direct taxation and transfer pricing.