Home office abroad: When does a permanent establishment arise? OECD updates model commentary

Remote work across national borders is part of everyday life. Many companies are wondering whether a home office abroad becomes a permanent establishment for tax purposes – with registration and tax obligations.

On November 19, 2025, the OECD expanded its commentary on Article 5 of the OECD Model Tax Convention and specified when a “home or other relevant place” is considered a permanent establishment.

What has the OECD changed?

A private location does not automatically become a permanent establishment. The decisive criteria are those of a “fixed place of business”: permanence, assignment to a company, and no purely preparatory activities. Two new guidelines have been introduced: a 50% time threshold and the question of a commercial reason for the presence in the country of activity.

The 50% threshold in a rolling twelve-month period

According to the commentary, the following generally applies: If a person uses their foreign home office or another relevant place for less than 50% of their total working time for a company, this place is not considered a business facility of the company. The basis is not the calendar year, but any twelve-month period. The actual working time is decisive, not contracts or policies.

From 50% home office: “commercial reason” as a filter

From 50% onwards, a qualitative assessment follows: Is there a commercial reason for the activity abroad? Such a reason exists if the presence facilitates business activities – for example, through customer appointments, network building, or services that require physical presence. If there is no such reason, working from home remains irrelevant for tax purposes – even if more than 50% of working time is spent working from home abroad. Personnel policy reasons (flexibility, office space savings, employee retention) do not count.

Special case: key personnel

In addition, there are cases in which the 50% limit is hardly relevant. This applies to situations in which a person in another country is effectively the “face” of the company and works the market there. Example: An employee residing abroad takes on responsibility for business development and contract preparation – mainly from their home office. In such cases, the home office can be considered a “foreign office,” so that a permanent establishment can be considered even without a precise percentage calculation.

What does this mean for companies?

The new rules provide guidance, but require control:

• Remote work rules should document permitted countries and reasons.
• Record working time percentages; tax audit from 50%.
• Pay particular attention to functions with direct market access.

The OECD commentary is not law, but it is an important benchmark for the interpretation of double taxation agreements. Companies should integrate the guidelines into their tax and HR processes.

How does Germany view the home office?

According to the BMF, a home office in Germany does not usually constitute a permanent establishment, as the company lacks control over private rooms. Even cost coverage or a rental agreement are not sufficient—unless the company is allowed to use the rooms for other purposes. This view applies under national law (Section 12 AO) and double taxation agreements. Exceptions only exist for management functions that effectively confer power of disposal. This means that the new OECD commentary is particularly relevant for outbound cases.