This is Part 2 of our two-part article on permanent establishment (PE) risk in a remote work era. To better understand how jurisdictions interpret and apply PE concepts in the context of remote working — including in light of the 2025 OECD Model Tax Convention (MTC) Commentary — KPMG’s EU Tax Centre conducted a survey in March 2026 of KPMG Member Firms1 in 63 jurisdictions worldwide2, building on a similar exercise conducted in 2023. The findings reflect Member Firms’ practical experience, informed by applicable domestic rules, administrative practices, and interactions with tax authorities. Building on the interpretative framework discussed in Part 1, this second article examines practical exposure points (fixed place of business and agency PE), compliance and enforcement considerations, and broader governance and residence implications for multinational groups. Click here for Part 1 of the article.
Introduction
Permanent establishment exposure triggered by using a home office (fixed place of business test)
Overall, the results illustrate a degree of uncertainty surrounding the official approach of local tax authorities regarding this topic. Key findings are outlined below:
Based on the responses received, only 25 percent of jurisdictions surveyed have issued specific guidance on PEs and cross-border remote work. A slightly higher number of respondents, 29 percent, indicated that administrative practice is available – typically in the form of tax rulings issued by the local tax authorities. Only 22 percent of surveyed KPMG Member Firms reported domestic case law in their jurisdictions touching on PEs and cross-border remote work (or similar home‑office scenarios) that could be used by taxpayers to assess the level of PE exposure triggered by employees working remotely from that jurisdiction. The largest group (43 percent) falls under the “Other” category. Based on the comments provided by respondents who selected this option, our understanding is that these responses generally reflect situations where there is no specific guidance or consistent case law addressing the PE implications of cross-border remote working arrangements – nevertheless, respondents typically expect the OECD MTC Commentary to be relevant for PE assessments performed in the context of tax treaties based on the OECD model.
Respondents were also asked to consider the specific criteria that would be relevant when assessing whether a PE has been triggered by an employee working remotely from a jurisdiction, with each jurisdiction identifying a combination of factors, such as availability of an office and the duration, frequency, location of customers etc.
The existence of a business connection with the host jurisdiction ranked second in terms of the most common criterion considered to be relevant. In other words, the existence of a commercial reason for the set-up – including the location of customers, clients, supplier or affiliates in the jurisdictions is expected to be relevant in the majority of the jurisdictions. This criterion is followed closely by factors such as the level of operations undertaken by the foreign employer through the employee in that jurisdiction – this could be determined by e.g. the number of client appointments or the regularity of cross-border work – for example whether the cross-border work is sporadic and unpredictable, or part of a stable, repeated arrangement (e.g., every week or every month).
As might 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 PEs.
Other factors mentioned as being important in the majority of the jurisdictions 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 an analysis of these criteria involves scrutinizing 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 agency PE
The third section of the survey focused on the applicable framework and the practice of the tax authorities in respect of individuals acting as dependent agents4 for their foreign employer. A key notion in this section is that of an agency PE. An agency PE refers to a situation when a PE is triggered by the so-called dependent agent, e.g., sales representative or a person who exercises decision-making power on behalf of a company in a country. One of the key conditions under this rule is that the activities of a dependent agent are habitually performed, which is again an assessment of facts and circumstances.
In this context, respondents were asked to indicate whether the concept of an agency PE is reflected in their jurisdiction’s domestic legislation, implemented in bilateral tax treaties through the OECD Multilateral Instrument (MLI)5, and/or addressed through administrative guidance, as well as whether such guidance provides clarification on key terms such as “habitually” and “independent agent,” which are central to determining the existence of an agency PE.
Treatment of permanent establishments
Eighty-four percent of respondents indicated that their domestic laws include the concept of agency PE, generally following the OECD MTC definition, including its BEPS-related updates. In a smaller number of cases, domestic law extends beyond the OECD MTC framework altogether. In Belgium, for example, an agency PE may arise under domestic law even in the absence of authority to conclude contracts and without the application of a preparatory or auxiliary activity exception. As a result, foreign enterprises may face initial registration or filing obligations (nil return) in Belgium, even where treaty relief is ultimately available.
At the treaty level, fewer jurisdictions indicated that they have opted to apply Article 12 of the MLI. The responses received further show that several jurisdictions have either introduced reservations, tied application to dispute‑resolution safeguards, or chosen instead to incorporate agency PE concepts through newly negotiated bilateral treaties rather than the MLI itself. This further contributes to a fragmented implementation landscape.
With respect to the interpretation of the term “habitually”, although survey responses reflect considerable variation in how this concept is framed, a common thread emerges: most jurisdictions avoid quantitative thresholds and instead apply a qualitative, substance‑based assessment, focusing on repetition, continuity, and the agent’s material involvement in the core business of the enterprise.
Similarly, in relation to the concept of an “independent agent”, jurisdictions that provide guidance tend to emphasize not only legal independence but also economic independence, the assumption of entrepreneurial risk, and absence of exclusivity. In several cases, agents remunerated on a cost‑plus basis or acting almost exclusively for closely related enterprises are presumed to lack independent status, significantly increasing agency PE exposure in routine operating models.
Finally, even in jurisdictions where no formal domestic guidance has been issued, respondents frequently noted that tax authorities rely on the OECD MTC Commentary as interpretative guidance.
Consistent with the OECD MTC Commentary, where contracts are signed (78 percent) and where contractual terms are negotiated (73 percent) were identified as the most relevant criteria when assessing potential agency PE risk. Several KPMG Member Firms stressed, however, that the substance of contractual negotiations often carries greater weight than the place of formal signature, particularly in cases where key commercial terms are agreed locally but contracts are formally approved elsewhere.
The location of customers was also highlighted as a relevant factor by 60 percent of respondents, reflecting the continued importance of understanding where economic activities are taking place. In addition, 63 percent of KPMG Member Firms considered the length of time an individual spends in the country to be a relevant factor, given its influence on assessing permanence and habitual activity.
Finally, 29 percent of KPMG Member Firms identified other relevant considerations, noting that agency PE assessments frequently require a broader, qualitative evaluation of factors such as the agent’s level of authority, degree of legal and economic independence, substantive involvement in client interactions, and whether premises are effectively at the disposal of the enterprise. Respondents also frequently emphasized that no single factor is decisive, and that agency PE determinations must be made on a case-by-case, facts-and-circumstances basis.
Considerations around digital nomads
As was the case with the 2023 version, the 2026 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. For the purposes of this survey, 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, such as their employer)6.
Based on survey responses, a limited but growing number of jurisdictions (seventeen in total7) have introduced schemes specifically designed to attract digital nomads or remote workers. These schemes take different forms, ranging from dedicated digital nomad visas (for example in Costa Rica, Greece, Italy, Malta, Romania and Spain) to more targeted immigration or residence permits allowing remote work for foreign employers (such as in Canada, Croatia, Kenya, New Zealand and Panama).
Although a number of jurisdictions have introduced immigration or residence‑based incentives for digital nomads, very few have addressed the associated PE implications from a tax perspective. For example, Malta has issued specific guidance clarifying the circumstances in which activities carried out by a digital nomad would not give rise to a PE of a foreign enterprise. Under the Maltese Nomad Residence Permit Rules, where the applicable conditions are met, the income of the foreign employer or foreign client(s) is deemed not to arise in Malta. However, no specific guidance applies outside the scope of these rules, and standard Maltese domestic PE law applies in all other cases.
In many other jurisdictions that have introduced digital nomad schemes, respondents consistently indicated that no special or flexible PE rules apply. Instead, standard domestic law and applicable treaty PE rules continue to govern, without distinction for digital nomads8.
Other aspects related to PE triggered by cross-border remote workers
The survey also examined tax authority practice and the practical consequences associated with the creation of a PE triggered by cross-border remote workers, including related compliance obligations and the implications of non‑compliance. The first question in this section focused specifically on whether the corporate tax implications of cross-border remote working arrangements are increasingly an area of discussion with local tax authorities.
Based on the survey responses, views on whether PE risks arising from cross-border remote workers are an area of increased focus for local tax authorities remain mixed. Overall, 30 percent of respondents9 indicated that their tax authorities are paying more attention to these arrangements. There is also a sense that scrutiny is more pronounced in certain jurisdictions. For example, Danish administrative rulings, based on the OECD Commentary 2017, illustrate a relatively strict approach whereby employees — particularly those with management or market‑facing roles — work from home in Denmark on a regular and planned basis. In rulings, the Danish Tax Council concluded that a foreign company had a PE in Denmark solely due to an executive employee working from a home office with decisive influence on management decisions, even in the absence of other business activities in Denmark10. These cases demonstrate that, in some jurisdictions, the presence of a senior employee performing core or management functions from a home office may, in itself, trigger heightened scrutiny that results in a PE.
Overall, these results should be interpreted with caution and should not be viewed as evidence that tax authorities are adopting a more permissive or relaxed approach. While examples such as Denmark point to increased scrutiny in certain cases, most respondents do not currently see PE risks arising from cross‑border remote working as a primary focus. That said, many expect this issue to gain importance as remote and hybrid working arrangements become more embedded in business operations.
The survey then shifted from the assessment of PE risk to the practical consequences arising where a PE is created, focusing on the compliance obligations that typically follow.
Compliance obligations where PE is triggered
Respondents broadly indicated that the recognition of a PE gives rise to tax registration, reporting and documentation requirements, with the survey responses pointing to a largely consistent compliance framework across jurisdictions, as summarized below.
- Corporate income tax (CIT) registration and filing with PEs often treated similarly to a resident entity or local branch11. These requirements frequently extend beyond tax filings to include branch registration, statutory accounts and local reporting.12
- Employment-related tax and social security obligations including payroll withholding, employer registration and social security obligations, effectively treating the foreign enterprise as a local employer for employment tax and social security purposes.
- Profit attribution and transfer pricing documentation with profit generally required to be determined in accordance with the arm’s‑length principle, often by reference to the Authorized OECD Approach. This typically requires a functional and risk analysis and supporting documentation. In some jurisdictions, such as China, simplified or deemed profit methods are applied in practice.
- Ancillary obligations and broader administrative impact such as VAT registration13 and filings, local accounting or bookkeeping requirements, and, in some cases, licensing or regulatory registrations.
The survey next examined whether tax authorities have issued specific guidance on profit attribution in situations where a PE is created as a result of cross-border remote working arrangements. The results show that explicit guidance addressing profit allocation in this scenario remains very limited. Only a small number of Member Firms (approximately 14 percent14) indicated that tax authorities have issued guidance and even then it generally reflects broader PE profit attribution, often aligned with the OECD’s Authorized OECD Approach (AOA) or standard domestic transfer pricing rules rather than rules specific to cross-border remote working arrangements.
In the same vein, for jurisdictions where Member Firms reported that no specific guidance has been issued, respondents consistently indicated that general PE and transfer pricing principles are applied in practice, usually by reference to the arm's length principle and, where relevant, OECD guidance. Several respondents explicitly stated that tax authorities address profit attribution in such cases on a case‑by‑case basis, sometimes relying on practical allocation keys (as noted in Kenya) or deemed profit approaches under domestic law (as observed in China and Algeria) rather than by reference to dedicated or stand‑alone guidance specific to remote working arrangements.
The survey then turned to the potential consequences arising where a PE is not correctly identified or where related compliance obligations are not met, including the types of sanctions that may apply and any other enforcement measures.
Survey responses indicate that failure to comply with PE‑related obligations can give rise to a wide range of consequences, with administrative penalties representing the most reported outcome across jurisdictions, reaching 100 percent in Europe. Administrative penalties include sanctions such as fines, late‑filing penalties, tax surcharges and interest on underpaid taxes, reflecting the most common response available to tax authorities where registration, filing or payment obligations are not fulfilled.
Beyond administrative sanctions, a significant number of Member Firms reported the potential for more severe consequences in serious cases in their jurisdictions, including criminal liability. This is notably the case in situations involving intentional tax evasion, fraud or deliberate concealment of taxable activities and often depend on monetary thresholds or proof of intent. While respondents in several Member Firms noted that criminal sanctions might not frequently be applied in practice, their availability highlights the potential consequences arising where PE‑related non‑compliance is considered aggravated.
Finally, for 14 jurisdictions, the responding KPMG Member Firms also highlighted a range of other consequences that may arise following a failure to correctly assess or comply with PE obligations. These include additional payroll or social security assessments, denial or limitation of treaty benefits, discretionary or estimated tax assessments, extended statutes of limitation, increased audit scrutiny, restrictions on business activities, practical impediments to the repatriation of profits, and broader reputational risks.
Company residence issues
The final section of the survey examined the impact of cross-border remote working on the corporate income tax residency status of a company. Survey results indicate that most jurisdictions (71 percent) do not determine corporate residence strictly based on the place of incorporation and that the place where key decision makers are located is a relevant factor in the assessment of corporate tax residence.
Respondents from KPMG Member Firms that look beyond incorporation were presented with two scenarios and asked to consider potential dual residence implications.
The first scenario involved executives working remotely from a jurisdiction other than the one in which the company they manage is incorporated or regarded as tax resident. Respondents were asked which criteria are relevant when assessing the effective place of management or central management15 and control from the perspective of the jurisdiction where the executive works from.
Respondents frequently emphasized that the determination of the effective place of management must be assessed on a case-by-case basis and that no single criterion is determinative. Tax authorities generally rely on an assessment of all relevant facts and circumstances.
Within this broader framework, and consistent with the Commentaries to the OECD Model, the decisive factors when determining the existence of a place of effective management were reported as being the location of the day-to-day management and where strategic decisions are made. Closely behind, many respondents emphasized the importance of whether executives attend board meetings (physically or virtually) from a different jurisdiction. Additional factors relating to executive presence, such as whether executives or directors are resident in the jurisdiction, the amount of time spent working there, and the availability of a designated working space, were frequently cited as relevant supporting indicators. Respondents generally stressed that these elements serve to corroborate, rather than replace, an assessment of where substantive management decisions are taken.
A recurring element across responses is that many jurisdictions explicitly reject timing thresholds16— such as a fixed number of days or the mere physical presence of executives — as determinative for residence purposes. Instead, tax authorities and courts typically focus on where “real” decision‑making occurs in substance, often distinguishing between operational activity and the highest level of managerial control.
The second scenario involved the same factual pattern, but from the perspective of the jurisdiction where the company is tax resident or incorporated, focusing on the criteria that may be used to challenge a company’s tax residence in that jurisdiction where senior executives work remotely from abroad.
Where jurisdictions apply substantive residence tests, respondents identified the location where strategic decisions are made (40 percent), and, closely thereafter, the place where day‑to‑day business decisions are taken and the physical presence of executives (33 percent). Respondents indicated that where residence is assessed, it is generally done through a facts‑and‑circumstances analysis, often aligned with central management and control or place‑of‑effective‑management concepts under domestic law and applicable tax treaties.
Finally, respondents were asked how tax authorities determine where a board meeting is held when executives are located across multiple jurisdictions. In practice, respondents reported limited guidance. Tax authorities often consider where the majority of directors are physically located or where key decision-makers — such as the CEO or chair — participate. If no clear majority exists, some respondents noted that the meeting may be treated as occurring where the virtual meeting was initiated, although this depends on the broader facts and circumstances. Several KPMG Member Firms emphasized that supporting documentation (such as board minutes and records of where decisions were made) is critical. Overall, respondents indicated that tax authorities tend to place greater weight on substantive decision-making activity rather than meeting logistics when evaluating the place of effective management.
Outstanding issues
While the 2025 update to the OECD Model Tax Convention (MTC) Commentary has provided clarification on a number of aspects relating to home office arrangements, certain questions remain when assessing the existence of a PE and the attribution of profits to it. In particular, experience to date suggests that several areas continue to give rise to differing interpretations across jurisdictions and could therefore benefit from further clarifications.
One such area concerns the treatment of management functions performed from a home office. Although the Commentary confirms that PE determinations depend on a facts‑and‑circumstances analysis and highlights the relevance of a commercial reason for the arrangement, uncertainty remains as to how management or executive functions should be weighed relative to other factors. Jurisdictional approaches to this issue are not uniform.
A second area relates to the interpretation of the “commercial reason” criterion. While the Commentary includes examples intended to illustrate circumstances in which a commercial reason may exist, the application of these examples to specific factual situations may give rise to differing views. For instance, uncertainty may arise as to how client‑facing activities carried out from a home office should be characterized, including how their frequency or regularity may influence the overall PE analysis.
Finally, the treatment of multiple employees working remotely from the same jurisdiction remains unclear, as the Commentary does not expressly address whether the cumulative presence of several employees should be considered where no individual presence would, in isolation, give rise to a PE. Although this issue was raised during the consultation process, it is not explicitly addressed in the final Commentary, and practice across jurisdictions reflects differing views.
Conclusions
Cross-border remote and hybrid working are not a temporary phenomenon17. Whilst the prevalence and the form of cross-border remote working arrangements vary significantly across sectors and jurisdictions, the overall direction of travel suggests that location‑flexible working models are likely to remain a key element of how internationally mobile work is organized.
Against this backdrop, the 2025 update to the OECD MTC Commentary represents an important response to changing business realities. Nevertheless, the results of our survey highlight that its practical impact has so far been limited and uneven across jurisdictions. Although the Commentary continues to be widely relied upon as an interpretative tool – particularly through administrative practice and case law, the vast majority of surveyed KPMG Member Firms report that their jurisdictions have not yet (as at April 2026) expressed a position on the relevance of the revised Commentary and have not updated domestic guidance. Consistent with findings from prior surveys, respondents emphasized that PE and corporate residence assessments remain grounded in a comprehensive facts‑and‑circumstances analysis. The survey confirms that the newly introduced 50 percent temporal threshold is rarely expected to be treated as a binding safe harbour – rather, in the majority of cases it is expected to function primarily as a reference point within a broader qualitative assessment. That assessment typically focuses on factors such as substance of activities undertaken in those jurisdictions, the role and seniority of the individual in the organization or the contractual provisions outlined in relevant employment agreements. In this respect, the results reinforce the fact that not all employees carry the same level of tax risk. Businesses should therefore adopt a differentiated approach, focusing attention on roles and individuals that are most likely to be scrutinized by tax authorities in the context of cross‑border remote working arrangements.
The survey also highlights that formal policies alone are not sufficient. Tax authorities place increasing emphasis on whether actual conduct is consistent with stated policies and contractual arrangements. Clear documentation of governance, decision‑making processes and lines of authority — particularly in relation to senior employees and executives, is therefore critical in managing both PE and corporate residence risks.
Looking ahead, further developments can reasonably be expected. The OECD has already signaled that global mobility and the tax implications of cross‑border working arrangements remain under active review and, to this end, launched a public consultation in November 2025. KPMG International submitted a detailed response, highlighting the challenges that businesses, individuals and tax professionals face as they navigate this evolving environment, and including a series of recommendations and simplification requests. The public consultation was followed by a meeting hosted in a hybrid format by the OECD on January 20, 2026. During the meeting, senior members of the OECD Secretariat stressed the importance of the future work on global mobility and the critical necessity of continued engagement with stakeholders as the work advances. During the April 17, 2026, American Bar Association Section of Taxation’s U.S. and Europe Tax Practice Trends conference in Rome — Ms. Fabrizia Lapecorella, Deputy Secretary-General of the OECD, confirmed that the OECD will present a proposal on the possible scope for future by the end of 2026.
Should you have any queries on the matters discussed in this material, please contact KPMG’s EU Tax Centre, or, as appropriate, your local KPMG tax advisor.
Part 1: Navigating permanent establishment risk in a remote work era
Part 1 of this article examines the interpretative framework for assessing PE risk in a remote work context and the relevance of the OECD MTC Commentary under domestic law and tax treaties. Part 1 of the article also looks at the expected impact of the 2025 revised OECD MTC Commentary at and whether the responding KPMG Member Firms expect new elements such as the 50 percent threshold to operate as practical safe harbours in their respective jurisdictions or whether the respondents’ view is that tax authorities are likely to continue to apply a primarily facts-and-circumstances analysis.
1 KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively. KPMG firms operate in 138 countries and territories with more than 276,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities. This comment paper is produced on behalf of KPMG member firms located in the EU forming part of KPMG’s Europe, the Middle East & Africa (EMA) region. Throughout this submission, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating in the EU. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
2 Jurisdictions surveyed include the following:
- Africa & Middle East: Algeria, Botswana, Cote d’Ivoire, Ghana, Kenya, Mauritius, Mozambique, Namibia, Nigeria, Qatar, South Africa.
- Americas: Argentina, Brazil, Canada, Chile, Costa Rica, Colombia, Dominican Republic, Guatemala, Mexico, Panama, Peru, United States of America, Uruguay.
- ASPAC: Australia, China, Hong Kong (SAR), China, India, Japan, Kazakhstan, Korea, New Zealand, Taiwan, Uzbekistan, Vietnam.
- Europe: Armenia, Austria, Azerbaijan, Belgium, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Ireland, Italy, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, United Kingdom.
Note that, as per the Diplomatic Service of the European Union, the EU classifies Armenia, Azerbaijan, Belarus, Georgia, The Republic of Moldova and Ukraine as European countries not part of the EU. We have therefore followed this classification for the purposes of this survey. For further details, please refer to: https://www.eeas.europa.eu/eeas/eastern-europe_en
3 An enterprise may have a PE in another territory if it has a fixed place of business there through which it carries on its business, subject to a number of specific activity exemptions. The fixed place of business test is generally based on a place both having a certain degree of permanency and being at the disposal of the business to be considered a fixed place of business for PE purposes. As mentioned above, the 2025 update of the OECD MTC Commentary does not change the text of Article 5 on PEs of the MTC.
4 Preventing the Artificial Avoidance of Permanent Establishment Status, Action 7 - 2015 Final Report
5 The Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent BEPS ("Multilateral Instrument" or "MLI"), jointly developed by more than 100 jurisdictions (the ad hoc Group) under a mandate from the G20 and adopted in November 2016. As a reminder, Article 12 of the MLI reflects the modified text of Article 5(5) of the 2017 OECD MTC resulting from the work on Action 7 of the OECD BEPS Action Plan, which deals with PEs. This includes broadening the concept of dependent agent PE to include commissionaire arrangements and other strategies for distributing products and services in a Contracting State. The dependent agent PE provision under the 2014 version of the OECD Model Tax Convention dealt with the conclusion of contracts "in the name of the enterprises" by a person acting on behalf of that enterprise. Article 12 of the MLI broadens the scope by referring to situations where "a person is acting in a Contracting State on behalf of an enterprise and habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise and these contracts are a) in the name of the enterprise, or b) for the transfer of the ownership of, or for the granting of the right to use, property owned by that enterprise or that the enterprise has the right to use, or c) for the provision of services by that enterprise". In addition, paragraph 2 of Article 12 reflects the wording of Article 5(6) of the 2017 OECD Model Tax Convention and provides that a person is not an independent agent if that person "acts exclusively or almost exclusively on behalf of one or more enterprises to which it is closely related". These provisions do not reflect a minimum standard, meaning that Contracting States may opt out of these provisions by entering a reservation against the entire article.
6 For more details on digital nomads please refer to a European Parliament factsheet.
7 Azerbaijan, Canada, Costa Rica, Croatia, Cyprus, Greece, Italy, Japan, Kazakhstan, Kenya, Malta, New Zealand, Panama, Qatar, Portugal, Romania, Spain.
8 In New Zealand, while no specific PE guidance is currently in force for digital nomads, legislative proposals are under discussion that would, if enacted, disregard certain activities performed by qualifying non‑resident visitors when determining the existence of a PE, subject to strict conditions and time‑based thresholds.
9 Algeria, Australia, Austria, Azerbaijan, Belgium, Cote d’Ivoire, Denmark, Dominican Republic, India, Italy, Japan, Namibia, Nigeria, Norway, Portugal, Spain, Sweden, United Stated of America, Vietnam
11 The only jurisdictions in which respondents indicated that no PE‑related compliance obligations were mandatorily applicable are Botswana, Brazil, Guatemala, Uzbekistan and Vietnam, with the caveat that, in Vietnam, individual income tax and social security obligations generally rest with the individual rather than the foreign enterprise.
12 By way of illustration, respondents in 28 European jurisdictions reported that the creation of a PE commonly entails compliance obligations extending beyond corporate income tax filing—such as branch registration, statutory accounting and local reporting. In the Americas, respondents in Costa Rica and the Dominican Republic highlighted mandatory registration in local taxpayer registries and compliance with broader corporate and payroll reporting frameworks once a PE is recognized. In Africa, Kenya and Nigeria noted that a PE is treated as a branch for tax purposes, triggering registration, local filings and related administrative obligations. In ASPAC, respondents in New Zealand and Japan referred to PE registration requirements accompanied by accounting, employer‑level and reporting obligations under domestic law.
13 Examples include VAT and accounting obligations noted in Italy, Greece, Portugal, Luxembourg, Sweden and Romania.
14 Examples include Australia, Finland, France, the Netherlands, Nigeria, Norway, and the UK.
15 The two most common approaches to determining tax residence for corporations are (i) place of incorporation, i.e., the jurisdiction considers a corporation to be tax resident if it is incorporated under its laws, and (ii) place where the corporation is effectively managed from. The latter is an assessment of facts and circumstances and typically takes the form of a place of effective management (POEM) test, a central management and control (CMC) test, or an assessment of other factors indicative of tax nexus, i.e., a connection to that jurisdiction (e.g., where the company has its bank accounts and bookkeeping).
- When assessing POEM, jurisdictions may consider facts such as place of day-to-day management, where strategic decisions are taken, where the annual meetings of shareholders are held, place where board meetings are held, place of residence of board members, etc.
- The exercise of central management and control (CMC) generally looks at where board meetings are held but also considers other facts and circumstances, such as whether in reality decision making power sits with persons other than the board so that central management and control is exercised outside board meetings (e.g., via a parent or by the executive management team). POEM can also be relevant to CMC jurisdictions in the context of a tie-breaker rule under a double tax treaty.
- The Commentary to the OECD Model Tax Convention refers to the place of effective management in solving dual residence problems that can arise where both contracting states consider an entity to be tax resident within their jurisdiction. Under the Commentary, the place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the entity’s business as a whole are in substance made16 The OECD Tax Statistics Database contains information on 65 IP regimes that were in place in 50 different jurisdictions in the year 2025. According to the OECD Corporate Tax Statistics 2025, 46 of these IP-regimes have been found to be not harmful by the Forum on Harmful Tax Practices (FHTP). Those regimes offer tax benefits that range from a full exemption to a reduction of about 40 percent of the standard tax rate that would have otherwise applied (reduced rates range from 0 percent to 18.75 percent). One regime was found to be potentially harmful but not actively harmful (in Brunei Darussalam). Six regimes are in the process of being amended or eliminated.
16 For example, Australia, Denmark, France, New Zealand, Switzerland, the UK.
Our authors
- Item 1
- Item 2
- 3
- 4
- 5