OECD Publishes Interpretative Guidance on the Creation of a Permanent Establishment in the Case of Employee Home Office
14. 1. 2026
On 19 November 2025, the Organisation for Economic Co-operation and Development (OECD) published an update to the Commentary on the OECD Model Tax Convention on Income and on Capital. One of the most anticipated topics addressed in this update concerns remote work, in particular home office arrangements, and the potential creation of a permanent establishment.
The key question is under what circumstances work performed from home or from another location abroad constitutes a permanent establishment of a company.
The assessment of whether a permanent establishment exists should be based on the following criteria:
These principles allow companies to further develop their remote work policies and promote modern and balanced working models. The OECD emphasizes that the assessment of the existence of a permanent establishment must be conducted individually for each relevant period, rather than by reference to past or future periods.
Additional assessment criteria include:
By contrast, cost savings or efforts aimed solely at attracting and retaining employees do not, in themselves, justify the existence of a permanent establishment. The fact that the place of work is typically at the employee’s disposal, rather than under the control of the employer, further weakens the assumption of a fixed place of business of the employer.
Implications for the Czech Republic
The Czech Republic has entered a reservation to these updates and will not directly apply the new quantitative criteria. It will continue to rely on an individual assessment of the factual circumstances without predefined threshold values.
Source: www.oecd.org
The key question is under what circumstances work performed from home or from another location abroad constitutes a permanent establishment of a company.
The assessment of whether a permanent establishment exists should be based on the following criteria:
- If an employee performs less than 50% of their total working time over a 12-month period outside the employer’s premises, this does not automatically lead to the creation of a permanent establishment.
- Even if the employee exceeds the 50% threshold of total working time outside the employer’s premises, this does not automatically result in the existence of a permanent establishment.
- A key factor is whether there is a commercial reason for carrying out activities at the given location (e.g. on-site customer support).
These principles allow companies to further develop their remote work policies and promote modern and balanced working models. The OECD emphasizes that the assessment of the existence of a permanent establishment must be conducted individually for each relevant period, rather than by reference to past or future periods.
Additional assessment criteria include:
- whether the place of work is used regularly and on a continuous basis for business activities,
- whether the activities performed go beyond preparatory or auxiliary functions,
- whether there are genuine commercial reasons, such as local customer support, real-time services, training activities, or cooperation with local partners.
By contrast, cost savings or efforts aimed solely at attracting and retaining employees do not, in themselves, justify the existence of a permanent establishment. The fact that the place of work is typically at the employee’s disposal, rather than under the control of the employer, further weakens the assumption of a fixed place of business of the employer.
Implications for the Czech Republic
The Czech Republic has entered a reservation to these updates and will not directly apply the new quantitative criteria. It will continue to rely on an individual assessment of the factual circumstances without predefined threshold values.
Source: www.oecd.org