The OECD insists on the concepts of availability of housing by the company and habituality in the exercise of the activity from that domicile; and underlines the importance of there being a commercial reason for the provision of services under a teleworking regime.
Remote working has become a common practice in many organizations, especially after the COVID-19 pandemic. This structural change raises relevant questions in the international tax field. Among others, can remote work from another country result in a permanent establishment (PE) for the company?
The Directorate General of Taxation (DGT) has already addressed this issue in several binding resolutions.
A significant example is resolution V0066-22, which analyses whether the fact that a worker performs his or her duties from his or her domicile in Spain for an entity resident in the United Kingdom implies the existence of a PE for that company in Spain. The interest of this and other resolutions is that they address the possible existence of PEs when the permanence of workers in Spain due to the pandemic, to work for the benefit of non-resident entities, is extended after this exceptional situation ended.
The DGT addresses this issue from the perspectives of the concepts of fixed place of business and dependent agent (defined in Article 5 of the agreement for the avoidance of double taxation between Spain and the United Kingdom) and refers to the comments on the OECD model convention in force at the time of issuing the resolution and to the report issued by the OECD on 3 April 2020 as a result of the crisis of Covid, subsequently updated January 21, 2021.
The DGT recalls first of all that, in order for there to be a fixed place of business within the meaning of the agreement, it is necessary that (i) there is a place of business, (ii) it must be fixed and (iii) all or part of the company’s activity is carried out there.
In this regard, the DGT states that the fact that a worker conducts his activity from his home (in this case, in Spain) does not in itself determine the existence of a PE for the non-resident entity. It will be necessary for the company to have a fixed place of business in Spain and to have the power of disposal over that place. In other words, mere physical presence is not enough; Regularity and control on the part of the company are required. And, to this end, it stresses that it should not be concluded that there is a PE when circumstances such as (i) the initiative for teleworking does not come from the company (i.e., when it is the employee who has decided to carry out his work in Spain, even if he has a workplace in the other State) or (ii) that the company does not bear expenses or remunerate the worker in a special way for using the housing for their work; because, in these cases, it must be understood that the property is not available to the company.
With regard to the perspective of the dependent agent, the DGT recalls (which is nothing new) that, for a PE to exist, it is necessary for the employee to have the power to conclude contracts on behalf of the company, so the fact that the activity is carried out from his home or from another place should be indifferent.
These issues are of greater interest following the recent publication, on 18 November 2025, of the update of the OECD model convention. Specifically, in the comments on Article 5 of the model agreement, the OECD has refined its interpretation of the impact of teleworking on the possible generation of permanent establishments, focusing its analysis solely on the concept of fixed place of business (the interpretation in relation to the concept of dependent agent remains unchanged).
From these new comments, interesting conclusions can be drawn.
Firstly, the OECD highlights that housing (as workplaces) often has characteristics that distinguish it from other places. For example, most housing is not accessible to other people who work for the company and have a higher degree of connection and control of the individual. As a result, it may be difficult to establish whether the activities conducted at such a place are sufficient to constitute a fixed place of business through which the activity of that enterprise is carried out.
Having noted this specialty, and after recalling that it is necessary to look at the facts and circumstances applicable to each case, the OECD indicates that three essential elements must be considered: (i) the disposition of the place by the company, (ii) the performance of the company’s activity from that place and (iii) the habituality in this exercise.
In relation to the disposition requirement, according to the OECD it can be understood that a home can be considered at the disposal of the company if it is used continuously to carry out its activity and the company requires the worker to use it for that purpose. On the other hand, if teleworking responds only to the employee’s personal preference and the company does not require that place to be used for its business, it should not be understood that the home is available to the company. It links the above with the concept of commercial reason.
The OECD says (in relation to this concept of commercial name) that it is necessary that there is a commercial reason that requires that the activities be carried out in a State other than the State of residence of the company and that the use of the employee’s domicile (or other relevant place) in that State facilitates the performance of these activities. In this sense, there will be a commercial reason for such a move, for example, when the individual interacts directly with customers, suppliers, associated companies or other persons on behalf of the company, and if this is facilitated because the individual is located in that State other than the State of residence of the company. On the other hand, a commercial reason will not be considered to exist if the worker’s presence in the State where he or she is domiciled is only required intermittently or incidentally (for brief occasional visits to a client’s premises, for example). To assess whether there is a business reason, it will ultimately be necessary to analyze the activity of the Company and the extent to which the individual’s specific activities relate to (and contribute to) that business. For these purposes, it will be understood that there is no commercial reason, for example, if the company allows a person to work from home only as a measure to retain that worker or to reduce costs.
As far as habituality is concerned, the OECD recalls that a home is also used for private purposes. And, in this sense, it is reasonable to consider what both uses (private/business) represent in the total use of the home. The OECD offers as a solution to consider that a household is not considered a place of business of the company if the person works from that place less than 50% of his or her total working time for that company during the course of any twelve-month period beginning or ending in the corresponding tax year. And, for this purpose, the formal contractual agreements between the individual and the company (including the relevant policies of the latter) must be considered, among others.
As can be seen, we are facing an area that presents enormous complexity, without being able to establish universal solutions. For this reason, a case-by-case analysis will be necessary, considering factors such as the degree of control, the duration, the reason for the displacement and the integration of the employee’s household into the business structure. In this context, the documentation of employment relationships undoubtedly acquires a crucial role.
