Redefining the Workspace: New OECD Guidance on Remote Working and the Fixed Place of Business

Redefining the Workspace: New OECD Guidance on Remote Working and the Fixed Place of Business

The rapid shift toward hybrid and remote work has created a complex challenge for multinational enterprises: when does an employee’s home office create a taxable presence, or Permanent Establishment (PE), in another country? The recent 2025 OECD report addresses this head-on, providing much-needed clarity through revised commentary on Article 5 (Permanent Establishment or PE). For businesses with cross-border talent, these changes offer a more practical framework for assessing tax exposure in jurisdictions where employees may be working remotely.

The new Commentary establishes a two-tiered test for determining if a home office constitutes a PE. 

• First, it introduces a quantitative threshold: a home is generally not considered a place of business if the individual works there for less than 50 % of their total working time for that enterprise over any 12-month period. This provides a "safe harbour" for occasional or intermittent remote work.
  
  
• Second, if the 50 % threshold is met, the determination depends on the facts and circumstances, specifically the existence of a "commercial reason" for the individual’s presence in that State. A commercial reason exists if the individual’s physical presence facilitates the business, such as through direct engagement with local customers, identification of new suppliers, or providing real-time support in a specific time zone. Conversely, a commercial reason is not present if the enterprise permits remote work solely to retain the services of a specific individual (talent retention) or to reduce its own infrastructure costs, such as office rent.

However, taxpayers must be aware that several non-member economies, such as India, do not agree with these new criteria. India maintains that a home used for business activities is at the disposal of the enterprise regardless of the 50 per cent threshold or commercial reason. Similarly, Nigeria argues that cost reduction should indeed be considered a valid commercial reason for establishing a PE.

Our View

For taxpayers, this update offers a clearer roadmap for managing global mobility but demands rigorous documentation. Companies must now track the physical location and working days of cross-border employees to ensure they remain below the 50 per cent threshold. Furthermore, enterprises must review the "commercial character" of remote roles; if a role is inherently linked to a local market, the risk of PE remains high even if the employee works from home. Finally, the divergent views of countries like India and Nigeria mean that taxpayers cannot rely on a uniform global standard, necessitating a country-by-country risk assessment to avoid unexpected tax assessments and double taxation.

How Grant Thornton Can Help You

At Grant Thornton in Thailand, our team of tax and legal experts is ready to advise on structuring cross-border technology arrangements to ensure alignment with Thai tax laws and international tax treaty obligations.