OECD Update: Risk of a Home Office Permanent Establishment?
[Introduction]
More and more people are working crossborder from home — including between Austria and France. But when does this create a taxable permanent establishment? As of 1 January 2026, the new rules of the OECD Model Commentary, updated in November 2025, will apply. These new provisions bring greater clarity and define the criteria companies must consider when their employees work cross-border from a home office.
The latest update to the OECD Model Commentary significantly revises the rules for assessing homeoffice permanent establishments. The previously central concept of “power of disposition” loses importance. Instead, the OECD focuses on three new core criteria: permanence, extent of use, and a commercial reason.
A permanent establishment may arise if a home office or other relevant location is used regularly and continuously, and if at least 50% of working time within a 12month period is performed there. However, even if these thresholds are exceeded, the decisive factor is whether a commercial reason exists for performing the activity abroad. According to the OECD, such a reason exists only if the employee’s physical presence in the respective state actually facilitates or enables the company’s business activities — for example through client meetings, support across time zones, or essential inperson services on site.
Pure cost savings, personal preferences of employees, or “accidental residences” explicitly do not qualify. As a result, socalled micro permanent establishments — which often triggered unintended tax consequences in the past — will become less common.
Examples published by the OECD clarify the practical application: While an employee who only occasionally visits clients or works primarily remotely does not create a permanent establishment, an employee who supports international clients in real time due to timezone differences may indeed trigger one. Companies must therefore carefully document why employees are working crossborder — and what actual benefit the location provides to the business.
For companies in France and Austria — especially those with mobile knowledge employees — the update offers greater legal certainty but also greater responsibility. Each situation continues to depend on the specific facts. If you would like to assess whether your crossborder homeoffice arrangements are affected by the new OECD rules, or if you need support with the tax evaluation, we are happy to assist. Your usual contacts will advise you personally, pragmatically, and with a clear focus on your company’s specific needs.
