Home Office Abroad – New Clarifications

What Applies Now?

• 50% - Threshold: In general, a home office or “other relevant place” does not constitute a permanent establishment if the individual works less than 50% of the time from the home office, calculated over any 12-month period.
• Commercial Reasons: If the individual works more than 50% from the home office, a closer assessment of the facts and circumstances must be made, where the existence of commercial reasons for establishing the home office in the relevant country is a key consideration.

What Does This Mean?

The update clarifies the boundaries for when a home office triggers tax liability for the company in another country and is in our opinion better aligned with today’s commercial realities. The new guidelines are particularly relevant in the following situations:

• A home office established due to the employee’s private life, including family, work-life balance, or a desire to work abroad, does not normally constitute a permanent establishment.
• A home office resulting from recruitment considerations or cost-saving measures does not normally constitute a permanent establishment.

You should still be aware of the following:

• If there are commercial reasons for the employee to be in the relevant country, for example if there are customers or suppliers in the country with whom the employee is in contact, the risk of creating a permanent establishment increases.
• If the employee is a key person (e.g. a decision-maker) in the company and independently carries out the company’s activities in the country, this will likely constitute a permanent establishment.

What Should Employers Do Now?

If you have employees working from abroad, you should be aware of the new guidelines and have robust procedures in place to monitor compliance. Considering the introduction of a specific threshold of 50% or more work from a home office, we recommend keeping track of the number of days. In all cases where employees will work from abroad, employers should consider the reasoning behind the choice of home office and have documentation ready regarding the tasks performed by the employee. Please also note that the new guidelines will not necessarily be automatically followed by all countries, and that a specific assessment must be made in each individual case.

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