Working from a kitchen table in another country, extending a business trip into a few extra weeks abroad, or logging in from a holiday rental. These have become everyday realities for many workers in our digitalised economy.
But as work becomes more mobile, a less visible question emerges: can working from “anywhere” create tax consequences for employers?
While businesses want to provide their workers with the benefits associated with mobile working, they also want greater tax certainty in a world where the way people work is changing. Is there a way the two could be reconciled?
Tax treaties, many of which are based on the OECD Model Tax Convention (OECD Model), already provide a framework for determining when a business becomes taxable in another country. Building on this framework, the OECD is working to help countries and businesses navigate how these long-standing rules apply in a world of cross-border remote work. In particular, it is providing clarity on how “taxable presence” should be understood when employees work remotely from another country.
So, what do these international tax rules mean for cross-border remote workers?
Where a tax treaty based on the OECD Model applies, a business resident in one country is only taxed in another country on its profits from activities there if it has sufficient presence, known as a “permanent establishment”. Article 5(1) of the OECD Model – largely unchanged since its inception in 1963 – defines this as a fixed place of business through which the activities of an enterprise are wholly or partly carried out. In practice, businesses want to be able to predict whether their activities in another country might cross this threshold, as this can shape their policies on cross-border remote working. The key question they come up against is simple: can an employee carrying out work from their home in another country create a taxable “place of business”?
What COVID-19 revealed about remote work and existing tax rules
As travel restrictions and mandatory “working from home” requirements took hold during the pandemic, the OECD and many governments issued guidance to address the immediate situation, released in April 2020 and updated in January 2021. As this guidance responded to a short-term public health emergency, it was temporary and no longer applies. However, the remote working patterns it addressed have not disappeared and, if anything, are seen in higher numbers than before.
In the absence of updated guidance, businesses and governments had little choice but to rely on the pre-existing OECD Model text. At just two paragraphs, it reflected a very different world: one in which cross-border home working would rarely pose practical issues, focusing mainly on cases where such arrangements were either continuous or very occasional. This no longer reflected the post-COVID-19 reality, and made it harder for businesses to assess risks and design remote working policies. Governments and businesses alike therefore recognised the need for greater certainty in applying the existing rules, leading to the changes published in the OECD Model in November 2025.
The changing landscape of remote working
Remote working can offer many advantages and is increasingly a personal preference for both existing and potential employees, for whose skills businesses compete. Many employers are willing to facilitate this to varying degrees and offer flexible working arrangements, including the option to work from a home abroad. In doing so, however, they need to consider whether those arrangements might create a taxable presence. This is where the updates to the OECD Model Commentary in November 2025 offer practical support, helping businesses better understand when a taxable presence may arise.
The changes recognise that an individual working remotely for a business from their home (or a similar place) in another country is something of a special case. They clarify when such arrangements may create a “place of business”, and when they will not. A person’s home is not typically accessible to others working for the business and remains under the individual’s control. As a result, the mere fact that a person works for a business from their home abroad does not automatically mean that there is a place of business there.
As a general rule, a person working from their home in another country for less than half of their total working time would not, on its own, result in a place of business. Even where more time is spent working from that location, it is important to consider whether there is a commercial reason for the business to be carried out from that country. If not, it is also unlikely that the home would be considered a place of business.
In many cases, working from home is part-time. For example, working two days a week from home under a hybrid working arrangement, or adding a few weeks of teleworking from a holiday home around a vacation. These arrangements are often driven by a personal preference and accommodated by the employer, rather than business necessity. As such, the updated OECD Model provides greater certainty in the majority of cases.
How can the updates to the OECD tax treaty standards be applied?
A common question is whether updates to the OECD Model Commentaries can be relied upon when interpreting and applying tax treaties concluded before the latest updates were introduced. The question arises because there are more than 3,000 tax treaties in force, many of which remain in place for years, even decades.
The key distinction is whether the changes to the OECD Model Commentaries directly relate to new or amended treaty provisions (that is, changes to the Articles of the OECD Model) that are not yet reflected in existing tax treaties, or whether they clarify how existing provisions should be interpreted and applied in practice. The November 2025 clarifications on cross-border remote working are of the second kind. As a result, they apply to the interpretation and application of provisions in existing treaties based on Article 5(1) of the OECD Model.
Taken together, the 2025 Update to the OECD Model Tax Convention offers practical guidance on increasingly common remote working patterns. It can be applied immediately by businesses navigating these issues and by governments administering their tax treaties, helping to provide increased certainty to taxpayers and governments in a changing world where work is no longer tied to a single location.
