The COVID-19 pandemic brought global mobility to the forefront of the agenda of business tax departments across the European Union (EU). An unprecedented global lockdown forced businesses to adapt to a remote working environment, where directors and employees found new ways to perform their duties. This shift did not only result in an economic and operational impact for companies (e.g., a change in the need for physical office spaces), but it also, in many cases, provided employees with increased flexibility with regard to their working arrangements.

In response to this shift, it has become increasingly common for businesses to enable cross-border remote working arrangements, which, in turn, has put multinational companies in a position where they need to re-evaluate their approach to managing a mobile global workforce. A 2022 study conducted by KPMG Internationalconcluded that the ‘work from anywhere’ approach is here to stay, with workplace flexibility expected to remain an integral part of the working world. This is evidenced by the fact that 89 percent of companies that responded to a KPMG survey2 confirmed that they have already introduced a remote working policy or were considering developing one.

While many businesses have implemented cross-border remote working arrangements, the ability to do so can prove challenging in practice. The physical presence of employees in a host country can trigger tax consequences for both the employer and the employee, irrespective of the length of stay in a jurisdiction.

With this in mind, this series of articles considers the potential corporate tax exposures triggered by cross-border remote work arrangements and provides practical insights on the approaches taken by local tax authorities in response to same. For context, it is important to bear in mind that the first two articles were written in 20213, when travel restrictions were still in place to a certain extent and businesses, governments, and tax authorities alike were all adjusting to the ‘new normal’.

Two years on, the third instalment of this series revisits the internal survey conducted in 2021. KPMG firms across Europe responded to an updated survey with the objective of identifying and monitoring potential changes in:

1. local direct tax legislation; and

2. the current attitude of local tax authorities in the context of cross-border working arrangements, as much as can be deduced from empirical evidence.

As was the case with the 2021 version, the revised survey focuses only on corporate tax, specifically considering the permanent establishment (PE) exposures triggered for employers and dual corporate tax residency implications. In addition, the revised survey has been expanded to consider the introduction of digital nomad schemes implemented across Europe, as well as the potential consequences triggered by the failure to register a permanent establishment.

The revised survey was conducted in May 2023 and covered 30 European countries4. We outline the key findings of same in the following sections.

Permanent establishment exposure triggered by using a home office

The first section of the survey assessed the likelihood that individuals working from home offices would pass the fixed place of business test5, which may trigger a permanent establishment exposure in the host state. We outline the key findings below:

Have local tax authorities issued guidance on how to assess permanent establishment implications triggered by remote workers?

A significant number of jurisdictions (73 percent) continue to rely on the Commentaries to the OECD Model Tax Convention for guidance. Specifically, we learned that (i) only five jurisdictions (Austria, Denmark, Slovenia, Sweden and Switzerland) reported that the local tax authorities issued guidance on how to assess the fixed place of business exposure triggered by cross-border remote workers, and (ii) only five jurisdictions (Denmark, Finland, Poland, Netherlands and Switzerland) reported that advance tax rulings were issued on the topic. Whilst not binding on third parties, these rulings could nevertheless provide insights on how the tax authorities approach this issue, which could be particularly useful in the countries where no official guidance has been issued to date.

Overall, the results illustrate a degree of uncertainty surrounding the official approach of local tax authorities regarding this topic. 

What criteria are typically relevant when assessing PE implications?

As a starting point, the survey respondents were asked a practical question regarding whether it is possible for employees to work for a limited time in a jurisdiction without triggering a PE.

As can be seen by the results to the right, this does appear to be a possibility in more than half of the jurisdictions surveyed. However, a significant number of jurisdictions indicated that this would need to be considered on a case-by-case basis (32 percent). In light of this feedback, businesses should assess the potential that cross-border working may triggers a PE by considering the facts and circumstances of each situation in light of the approach adopted in the respective jurisdiction.


Has the attitude of local tax authorities changed in the context of assessing permanent establishment implications triggered by remote workers?

The vast majority of respondents (83 percent of jurisdictions surveyed) noted that there has been no significant change observed in the attitude of their local tax authorities. Three countries (10 percent of respondents) reported that they noticed a more relaxed approach being applied, while the opposite experience was observed in two countries where tax authority scrutiny has intensified.



Furthermore, only nine jurisdictions were able to estimate a maximum number of days in which an employee of a foreign company could use a home office in their jurisdiction without triggering a PE exposure. In nine jurisdictions, employees could work in a home office for a maximum of 183 days with minimal or no implications from a PE perspective, with one of these jurisdictions noting that a period beyond 183 days may also be possible in certain circumstances. In contrast, one jurisdiction indicated that a permanent establishment exposure could be triggered after a relatively short period.

It is important to highlight that the periods above should not to be treated as safe harbors. The responses generally highlight the current expectation of how the OECD Commentary could be interpreted locally. However, given the lack of clear guidance issued locally, the approach of the local tax authorities could be inconsistent or could be the subject of future change. Sweden is the only reported exception, where remote workers can benefit from an increased level of certainty. A statement issued by the Swedish tax authorities lists a series of criteria that, if met by an employee working from their home office in Sweden, would mitigate the permanent establishment exposure irrespective of the period of time spent by the employee working in that country.


Criteria typically relevant when assessing PE implications triggered by remote workers (whether based on formal guidance or practice)

Respondents were also asked to consider the specific criteria that would be considered when assessing whether a PE has been triggered in a jurisdiction, with each jurisdiction identifying a combination of factors, such as availability of an office and the duration, frequency, nature of remote work etc.

The most common criterion used across the jurisdictions to assess the existence of a PE appears to be the nature of employee’s remote work. This is somewhat unsurprising given that this criterion is in line with the OECD Model’s exemption for activities that have a preparatory or auxiliary character.

The existence of a business connection with the host jurisdiction ranked second in terms of most common criterion considered. In other words, the level of operations undertaken by the foreign employer in that jurisdiction, through the employee (this could be determined by e.g. the number of client appointments) is relevant in most jurisdictions. As might also be expected, due to the responsibilities and decision-making authority of C-suite executives (which are likely to result in activities that go beyond those with an auxiliary character), the seniority and role of the employee was also reported as being a key consideration in the assessment of the existence of permanent establishments.

Chart 4

The degree of permanence of the work arrangement (particularly the number of days the employee spends working in that jurisdiction) was also a relevant factor in many jurisdictions.

Other factors mentioned as being important included the nature of the work arrangement (i.e., was remote working a personal choice or required by the employer) and the potential reimbursement of costs related to setting-up and maintenance of a home office. Whilst the analysis of these criteria involve the scrutiny of the employment contract concluded between the two parties, other factors could also indicate that a home office has been put at the disposal of the foreign employer. For example, one respondent to the survey mentioned that tax authorities could check whether the home office address is written on the employee’s business card along with company details, whether the home office is listed in the company’s internal directory or whether the employee accepts regular visits from representatives of the company in their home office.

Permanent establishment exposure triggered by a dependent agent

The second section of the survey was focused on collecting insights regarding local tax law and practice of the tax authorities in respect of individuals acting as dependent agents6 for their foreign employer.

Is the length of time spent by an individual working in a jurisdiction (other than the one of their employer) relevant for the agency PE test?

What criteria are relevant for assessing the agency PE test?


Consistent with the OECD Commentary to the Model Treaty, the jurisdiction where contracts are signed and the jurisdiction where the contractual terms and conditions are negotiated were identified as relevant criteria by nearly all respondents (86 percent of countries, and 93 percent of countries, respectively).

The presence of a significant customer base in the host jurisdiction, on the other hand, was deemed to be less relevant, with it being selected by less than half of the jurisdictions (41 percent).

Considerations around digital nomads

As mentioned above, the 2023 survey considers schemes introduced by jurisdictions to attract remote workers, perhaps the most prominent of which are digital nomad schemes and special rules for start-ups. Specifically, it should be noted that the term ‘digital nomad’ refers to an individual who consistently works remotely from various locations, rather than from a fixed place of business (i.e., a place other than that of their main source of income (i.e., employer)7 ).

Based on the responses to the survey, six EU countries (Croatia, Cyprus, Greece, Malta, Romania, and Spain) have introduced these types of schemes. Interestingly, among the jurisdictions that have introduced such schemes, it appears that none of the local tax authorities have released specific guidance on the circumstances under which a digital nomad would create a permanent establishment in that jurisdiction.

Administrative aspects concerning permanent establishments triggered by remote workers

The survey also considered the practice of local tax authorities and the practical consequences triggered by the creation of a permanent establishment (including compliance obligations and consequences generated by the failure of observing them).

Arguably the most noteworthy finding from this aspect of the survey is that only eight jurisdictions (27 percent) reported having observed that the topic of permanent establishments triggered by remote workers has become an area of increased focus for their local tax authority. For the avoidance of doubt, this should not be taken as an indication of a more relaxed attitude by the tax authorities, but merely highlights that the topic may not be a primary area of tax authority focus currently. It remains a strong possibility that, as remote working arrangements continue to evolve and become increasingly common, tax authority interest in this matter could increase accordingly. This was recognized by two survey respondents who expect change of attitude in the future in their respective jurisdictions.


At this stage, it is worth recalling that, where a PE is triggered by an employee working remotely in a jurisdiction, a number of direct tax compliance obligations may be imposed by local tax authorities. Specifically, corporate income tax registration and compliance obligations generally arise in the host jurisdiction8. The graphic below provides an indication of the main filing obligations that may arise.

Failure to comply with these requirements would result in the application of penalties and late payment interest in all countries. Several jurisdictions (nine) have nevertheless reported additional and more severe consequences, up to and including potential criminal charges (e.g., three jurisdictions noted that criminal charges could be brought in the case of fraud / tax evasion).

Dual residence considerations

The final section of the survey examined the impact of remote working on the corporate income tax residency status of a company. Respondents were presented with two potential scenarios and asked to consider dual corporate residence implications.

The first scenario looked at the case of executives working remotely in a jurisdiction other than the jurisdiction in which the company they manage is incorporated or resident – for example, a company tax resident in Germany (the home jurisdiction), with a CEO living and working from France (the host jurisdiction).

Most respondents (87 percent) indicated that the carrying on of activities by an executive from a different jurisdiction could result in the company being deemed to be tax resident in the host jurisdiction. In line with the Commentaries to the OECD Model, the decisive factors when determining the existence of a place of effective management9 were reported as being the location of the day-to-day management and the center of management and control10.

The second scenario asked respondents to consider the same pattern of facts presented above, but from the perspective of the jurisdiction where the company was incorporated. Looking at board meetings, most jurisdictions indicated that there is not a minimum number of board meetings that need to take place in a country for a company to be considered to be resident therein. In the case of hybrid board meetings, we note that jurisdictions do not have set percentages of executives that are required to be physically present in a jurisdiction for meetings. However, at the same time, a number of survey respondents did note that it would be recommended that the majority of board members are physically present for meetings.


The main takeaway of the survey was the limited guidance available in most EU countries on the corporate income tax treatment of cross-border remote work, even in those jurisdictions that have introduced digital nomad schemes. In line with the findings of the 2021 survey, the responses reflected the need for a comprehensive case-by-case assessment to determine potential permanent establishment and dual corporate tax residency implications. Elements such as whether working remotely was the choice of the employee, the role and seniority of the individual in the organization and the contractual provisions outlined in relevant employment agreement are key elements in all of the jurisdictions surveyed.

Whilst the current guidance provided in the Commentaries to the OECD Model Tax Convention may offer some insights into assessing the implications of the "new normal," it was primarily developed for a work environment where office-based operations were the standard, with limited employee autonomy in choosing their work location. Given the significant reliance most survey countries have on the OECD Commentaries, revised guidance from the OECD would prove beneficial for tax authorities and taxpayers alike. Such guidance would bring much-needed legal certainty and assist multinationals with the re-designing of their global mobility policies. For example, in July 2023, we note that the new Administrative Guidance issued by the OECD on the Global Anti-Base Erosion Model Rules (Pillar Two) clarifies various aspects of the substance-based income exclusion, including the treatment of employees located in more than one jurisdiction11.

The European Union may also take a closer look at addressing the complex tax challenges of remote work arrangements. As reported by a media outlet, the Belgian Minister of Finance acknowledged during a live event the increased need to start discussing the tax challenges brought by the increased prevalence of cross-border work. The Minister noted that such discussions could take place during the Belgian Presidency of the Council of the EU (January-June 2024) and highlighted the need for the topic to also be discussed at the OECD level.

Nevertheless, reaching an agreement would represent a complex task, as unanimity is required at the level of the EU to adopt tax files. As remote work could translate into a loss of revenues for certain Member States, any related legislative proposal would have to strike a balance between a sustainable tax policy in terms of reduced administrative burden and flexible approach to remote work.

Furthermore, businesses should also apply a holistic approach when designing and implementing cross-border remote work policies – as they would need to also consider the impact on other tax obligations such as value-added tax, personal income tax, and social security contributions. Even if the analysis determines that no taxable presence is triggered for a non-resident employer in a country where an individual is (permanently) based, it is essential to recognize that there might still be payroll reporting and payment obligations in that jurisdiction. We continue to see policy developments in this regard at an EU level, with the proposed framework agreement for social security taxes being the most recent example12. With this in mind, it is clear that the tax implications of remote working will need to be monitored continuously in the coming years.


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