On November 19, 2025, the OECD (Organisation for Economic Co-operation and Development) released its 2025 update to the model tax convention, a document widely used by countries to interpret double taxation treaties.
One of the most relevant sections for global employers, and especially for companies working with distributed teams, is the new guidance on how remote work can create a permanent establishment (PE).
Navigating the new OECD rules for remote worker compliance
In the 2025 update, the OECD confirms that having an employee working from home in another country does not automatically create a PE. However, tax authorities now have more precise criteria to evaluate whether a company has a taxable presence through remote workers.
Two key indicators increase the likelihood of a PE:
1. Time threshold: If an employee performs 50% or more of their work over any 12-month period from their home or regular remote-work location, the risk rises.
2. Commercial reason: A PE is more likely to be created if the employee’s physical presence in that country directly supports or advances the company’s business, such as:
Meeting clients or developing new markets
Managing suppliers or local partners
Providing services that require physical presence
Collaborating in real time with teams, clients, or institutions in that region.
Remote work granted purely for talent retention or cost-saving reasons does not create a commercial reason.
Special consideration: Founder-led or one-person companies
The OECD provides explicit guidance for companies where one individual is essentially “the business.” For example, a founder living in one country but operating through a company incorporated in another. In these cases, the individual’s home is very likely to be viewed as the company’s place of business, creating a PE by default.
What does this mean for global employers?
The new guidance does not necessarily mean that your company now has new tax obligations. But if you hire employees abroad, or operate with a distributed workforce, it is increasingly important to:
Understand where your people work,
Assess whether their work has a commercial reason,
Review whether operations could be interpreted as a PE, and
Ensure compliance aligns with your global expansion plans.
How Remote helps mitigate PE risk
Remote’s team of global HR experts continuously monitors changes in international tax guidance (including the OECD 2025 update) to help you:
Understand potential PE exposure
Structure remote roles more safely
Manage compliance across jurisdictions
Support global hiring without unexpected tax burdens.
Next steps
Remote work is here to stay, and international tax rules are evolving to catch up.
The 2025 OECD update gives tax authorities clearer tools, but also gives companies clearer ways to evaluate risk. If your organization employs talent abroad and you'd like a quick assessment of your exposure, or guidance on structuring remote roles, our team is here to help.
Interested to learn more? Book a demo with us and make global hiring simple.
