New Express Reply Service ruling (EAS): Austrian Ministry of Finance (BMF) denies home office PE if the employer does not require the use of the home office

Recently, the BMF published a new EAS ruling 3445 in which it denied the qualification of a home office as a permanent establishment (PE) because working in the home office was not required by the employer.

Circumstances

A person residing in Austria is employed at a German-based managing holding company’s accounting department. The person permanently works at the company’s premises in Germany three days a week. The other two days, she works from home in her private residence in Austria. At issue was whether the German holding company thus establishes a PE at the employee’s home office in Austria.

Opinion of the BMF

According to the BMF, no PE exists if:

• the activity is merely of auxiliary nature, or
• the activity is performed only occasionally from home, or
• the employer does not require the employee to perform her duties from home.

An activity does only qualify as of auxiliary nature if it does not constitute the company’s core business. In the aforementioned case, the BMF considers accounting activities to qualify as a managing holding company’s habitual activities that are provided to other companies within the group. Therefore, the exemption for activities of auxiliary nature does not apply.

If an employee works in the home office two days a week, the BMF considers the threshold of merely occasional performance of an activity as exceeded, whereby following the Austrian administrative practice a de-facto power of disposal over the home office as a fixed place is principally given and the home office qualifies as a PE.

In this specific case, however, following the OECD MC 2017, the BMF denies the existence of a de-facto power of disposal and thus the existence of a PE because the German holding company does not require the employee to work from home. This is reflected by the fact that the holding company provides a permanent, personal workplace in Germany to the employee and that the employee performs her duties at this place of work three days a week. As the use of the home office is not required by the employer, and thus no de-facto disposal of power is triggered, no PE is created in Austria according to the BMF.

According to the BMF, however, for executive employees a mere lack of a request to work from home does not have any impact on whether the home office qualifies as a PE.

Implications in practice

• The BMF now confirming that no PE exists in those cases where non-executive employees perform their duties 2 days a week from home and 3 days a week in the office, provides great relief in practice. In this context, the BMF focuses on the fact that the employer does not require the employee to work from home. What is essential in this context is that companies provide evidence that the workplace provided at the office is actually used.
• In practice, all other cases, such as executive and managing employees or employees predominantly working from home, will have to be analysed and evaluated individually as to the extent to which the recent reasons for non-existence of a home office PE may apply and can also be documented.
• Before granting employees’ wishes of (a higher number of) home office days, companies should thus always examine in advance which implications under tax law might result from seemingly insignificant set-up changes. In this context, it is essential how it may be documented that the employer did not require the employee to work from home.