On 17 March 2026, the Swedish Tax Agency published a new guidance (Sw) replacing its previously published guidance “When does an employee’s work from home result in a foreign company having a permanent establishment? (Sw)". The previous position paper has therefore ceased to apply.
In the new guidance, the Swedish Tax Agency refers to the OECD’s updated commentary on when work from home may constitute a permanent establishment (published on 19 November 2025). The Agency states that the definition of permanent establishment under the Swedish Income Tax Act is based on the OECD Model Tax Convention, which has also been taken into account in case law when interpreting domestic law.
In the 2025 update of the OECD Model Tax Convention, the commentary to Article 5 was revised and now clarifies when work performed, for example, from a private residence or a holiday home in another state may give rise to a permanent establishment. Against this background, the Swedish Tax Agency has concluded that there are no longer grounds for maintaining the previous position paper.
In a previous issue of TaxNews, we outlined the key updates to the OECD commentary in relation to when remote work may lead to a company having a permanent establishment in another country. As the Swedish Tax Agency’s previous position paper has now ceased to apply, it is of significant importance for foreign companies with a presence in Sweden to reassess their Swedish tax exposure in light of the OECD’s updated commentary.
The OECD’s updated commentary entails, among other things, the following in relation to the Swedish Tax Agency’s previous position paper:
- An employee who works from home or from another non business related location for less than 50 per cent of their total working time during a twelve month period is generally not considered to create a permanent establishment for the company. If the working time exceeds 50 per cent, a more comprehensive assessment of the factual circumstances is required. No corresponding clear percentage threshold existed in the Swedish Tax Agency’s previous position paper, which instead relied on a more general overall assessment.
- A clearer requirement is introduced that there must be “commercial reasons” for the work being performed in the other state. This means that the individual’s physical presence must contribute to the company’s business activities, for example through customer contacts, market development or access to resources. In the absence of genuine commercial reasons for working from that location, it is generally not considered to be at the company’s disposal, unless other specific circumstances apply. The Swedish Tax Agency’s previous position paper addressed similar aspects, but not as explicitly or systematically.
- A specific approach is introduced for situations where the individual is the sole or main person carrying out the company’s business activities. In such cases, for example where a consultant performs most of the activities over an extended period from a home office in another country, it is expressly stated that the home office constitutes a place of business of the company. This represents a clearer and more direct link between the individual’s activities and the company’s place of business than was apparent from the Swedish Tax Agency’s previous position paper. It may be noted, however, that the Agency’s previous position paper contained a specific reference to individuals in senior management positions, which is not included in the OECD’s updated commentary. Although the wording regarding individuals who are the sole or main persons conducting the company’s business may partly cover similar situations, certain differences nevertheless remain.
- It is also more clearly emphasised that a private residence is normally under the individual’s control and therefore does not automatically constitute a place of business of the company. For this to be the case, the use must be continuous and the circumstances must otherwise demonstrate that the location is in fact used in the company’s business activities. At the same time, the OECD has further developed its reasoning on “permanence” and clarified that temporary work, for example for a few months, is normally not sufficient, whereas recurring use over time may be relevant.
- Finally, the OECD’s updated commentary includes more detailed and practical examples illustrating how various factors should be weighed together, particularly in modern remote working environments.
