The Organisation of Economic Co-operation and Development has introduced new guidelines for determining whether a remote employee’s home office amounts to a permanent establishment that attracts tax for a foreign employer.

The guidelines formulate a two-part test for use in determining whether a permanent establishment exists. The tests consist of a temporal threshold and an inquiry into the commercial reason for the employer’s presence where the home office is situated.

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According to the guidelines, a permanent establishment exists when a remote employee works from a home office in a country for at least 50 per cent of their working time over any rolling 12-month period. In addition, there must be a commercial reason for the employee’s presence in that country, such as regular........

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