On November 19, 2025, the OECD clarified the rules on the creation of a permanent establishment for tax purposes in connection with working from home. The changes are particularly relevant for companies whose employees regularly work remotely from abroad.
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Working from home – or home office – and its relationship to permanent establishment
Due to technological
developments, it is now common for employees to spend all or part of their
working time at home or in another country. However, cross-border remote work
may involve significant risks: the employer may be deemed to have a
permanent establishment in the country where the work is performed abroad,
which can result in tax obligations.
Until now, in practice the main question was whether the employer had actual control over the employee’s place of work at home. However, this led to legal uncertainty, as the relationship between employer and employee did not always make it clear how actual control should be assessed or to what extent it existed. The criteria have now become more precise and clearer.
The three conditions for a permanent establishment due to home office work
In the future, a permanent establishment will arise from home office work only if all three of the following conditions are met.
1. A place of business can only be a permanent, regularly used place of work.
For a permanent establishment to arise, the workplace must be available on a permanent basis. Work does not need to be carried out continuously from home, but it must be regular. Temporary home office work lasting only a few months within a tax year does not create a permanent establishment.
2. A permanent establishment arises only if the employee works from home for at least 50% of their working hours.
A permanent establishment can only arise if the employee carries out at least half of their working hours from home in the relevant state. This is an important new element, as until now the assessment of a permanent establishment was not linked to such a specific proportion.
3. A permanent establishment exists only if it serves the employer’s economic interest.
Remote work gives rise to a
permanent establishment only if it is economically justified for the
employer that the employee works in the given country.
Such a justification could be, for example:
- Building and maintaining local business relationships, and communicating with clients
- Serving, advising, and training clients in the given country.
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It does not qualify as an economic justification.
- if the work is performed abroad solely due to the employee's personal preference (e.g., moving abroad for personal reasons).
The responsibilities of companies when employing their employees in remote work or home office.
With the spread of international work, it is becoming increasingly important for companies:
- to review the internal regulations concerning remote work,
- to document the economic justifications and the place of work
- to consider whether employees’ work performed from abroad may give rise to tax risks
Despite the new OECD rule, the tax authority practice of individual countries remains decisive in assessing specific situations, so it is worth monitoring the guidance issued by the Hungarian tax authority (NAV) in this regard.
