What the OECD’s PE update means for you
As cost pressures and talent dynamics reshape working patterns, more employees are spending part—or all—of their working time outside the Netherlands while remaining on a Dutch payroll. If you have an employee working remotely from abroad (even a few days per week), the OECD’s newly updated guidance on permanent establishment (PE) becomes immediately relevant: in the wrong setup, that home office can be treated as your business presence abroad, triggering corporate income tax exposure in the employee’s country, plus filings, profit attribution work and audit risk.
What changed in 2025?
The OECD updated the Commentary to the OECD Model Tax Convention in 2025 and replaced the older “home office” paragraphs with a dedicated section on “cross-border working from a home or other relevant place”. New rules are clear: PE outcomes depend on facts and business reality and not labels in contracts.
The baseline PE framework still applies
The Commentary keeps the classic PE framework (a fixed place with sufficient permanence, enterprise business carried on through it, and any preparatory/auxiliary exception). The OECD also illustrates that short, personal stays abroad can lack the required permanence (for example, a temporary few-month rental).
The new practical test you should know
What is new is more operational guidance for remote work, especially around “how much” and “why.”
1) How much time is spent working from that place?
The OECD introduces a helpful indicator:
- If an individual works from the home/relevant place abroad for less than 50% of their total working time for the enterprise over any 12-month period, the home will generally not be treated as a place of business of the enterprise.
- If the individual works there for 50% or more, PE risk must be assessed based on all circumstances.
2) Why is the employee working from that country?
Where the 50% threshold is met, a key factor is whether there is a commercial reason for the enterprise’s activities to be carried on in that country. Examples that can point toward commercial reasons include meaningful customer-facing work, access to local resources, or real-time coverage of a different time zone.
By contrast, allowing remote work only to retain talent or to reduce office costs should not, on its own, create the required commercial link.
Why this matters for Dutch employers
If a PE is created, you may face:
- local corporate tax registration and returns,
- transfer pricing / profit attribution analysis,
- more documentation and audit exposure.
Practical actions you can take now
- Track reality, not just policy: working-time ratios and travel patterns should be measurable and documented.
- Separate “permission” from “business need”: be explicit when remote work is employee-driven versus business-driven.
- Review roles with customer-facing authority or regular in-country engagement.
How we can help
- PE risk scans for cross-border remote work
- drafting remote-work policies that reflect day-to-day practice (including a remote-work calendar for planning and compliance),
- mitigation strategies (role design, travel/meeting protocols, documentation),
- PE compliance and profit attribution support where a PE is unavoidable.
Are you unsure whether cross-border remote work is creating a PE risk—or are you already facing questions from a foreign tax authority? Engage a specialised tax advisor. At DTS, we help clients assess, document and defend their PE position (in the Netherlands and internationally), and where needed implement practical mitigations and support PE compliance.
