Updates to the permanent establishment (PE) for cross border remote work through the 2025 OECD update

During the work on the update 2025 of the OECD model treaty and model commentary (hereinafter MC), the topic on the agenda, among other things, was the international mobility and the thereby growing cross-border remote work. As of 18 November 2025, the OECD has published an extensive update of the MC.

The new specifications bring significantly more clarity for the practice for employers with cross-border working models and, in many cases, also reliefs.

Most significant changes are:

• • The specifications relate not only to the cross-border working from home office, but also from other private residences (so-called “other relevant places”) such as secondary residences, holiday residences or apartments of friends or family members. It is typical that the working person – and not the company – controls the premises and that other employees of the company have no access.
  • The OECD cites now concrete time threshold of reference. Thereby, contractual remote work regulations are allowed when determining the time thresholds as long as they represent the actual working reality and working time.
  • If the remote work accounts for less than 50% of the whole working time, no PE exists provided that there are no other circumstances.
  • If the employee works 50% or more from home or from another private residence, a case-by-case assessment is required. Thereby, for determining if a PE for remote work exists, the focus lies on business reasons. For example, the OECD names physical interaction with customers or suppliers, access to business-relevant expertise in the same region or continuous service availability due to different time zones as business reasons.

Compared to the Austrian Transfer Pricing Guidelines 2021 (VPR 2021), the new specifications are extensive and include several examples. The statements of the OECD significantly differ from the VPR 2021, for example, when referring to business reasons for the activity in another state. Basically, there is a slight pressure in terms of interpretation regarding the update for the tax authorities. However, there are no statements from the Austrian Federal Ministry of Finance (BMF) to what extent the changes in the OECD update 2025 are being adopted.

 Conclusion and outlook

• The indications in the course of the update are to be welcomed and represent a significant relief for the practice.
• The business reasons as a main element for the assessment whether a permanent establishment exists or not, meet the challenges of cross border home office in practice.
• The extensive specifications create more clarity and therefore legal certainty for the companies.
• It remains to be seen to what extent the BMF and the Austrian taxation practice include the specifications of the OECD regarding the assessment of PE for cross border remote work.
• Companies with cross-border working models need to check and document their case regarding the new statements of the OCED update.

Authors: Martin Jann, Marlies Ursprung-Steindl, Precious Ogbodo