The OECD Deleted Its Home-Office PE Guidance in November 2025

Almost everything written about whether a remote worker creates a permanent establishment cites paragraph 18 of the Commentary on Article 5 of the OECD Model Tax Convention. That paragraph no longer exists. It was deleted on 18 November 2025, along with paragraph 19, and replaced by a new twenty-one paragraph section with a different conceptual test and a numerical screen that was not there before.

What was deleted

The current Model Convention is the 2025 Full Version, reflecting the text as it read on 18 November 2025, the 2025 Update having been adopted by the OECD Council that day. In it, Commentary on Article 5 paragraphs 18 and 19 read in their entirety: deleted on 18 November 2025, see history.

The deleted paragraph 18 is the one everyone knows. Between November 2017 and November 2025 it said that part of an enterprise's business being carried on at a location such as an individual's home office should not lead to the automatic conclusion that the location is at the disposal of the enterprise simply because it is used by someone who works for the enterprise. It then gave the test that generated a decade of advice: where a home office is used on a continuous basis and it is clear from the facts and circumstances that the enterprise has required the individual to use that location, the home office may be considered to be at the disposal of the enterprise.

Paragraph 19 contained the cross-frontier-worker example and the reassurance that the question would rarely be a practical issue.

So anyone quoting the at-the-disposal-of test from paragraph 18 today is quoting deleted text. That includes most of the published commentary on remote-work permanent establishment risk, because it was written while the paragraph was live.

What replaced it, and the shift in concept

A new section headed cross-border working from a home or other relevant place now runs from paragraph 44.1 to 44.21, every paragraph marked as added on 18 November 2025.

The framing is deliberately broad. Paragraph 44.1 addresses individuals who are able to, and choose for personal reasons to, carry out all or part of their work for an enterprise of one state from a place in the other state that is not premises of the enterprise or of a connected enterprise such as a customer, supplier or associated enterprise. It gives as examples the individual's home, a second home, a holiday rental, and the home of a friend or relative.

The conceptual change matters more than the wording. The old test asked whether the home was at the disposal of the enterprise. The new test asks whether the home is a place of business of the enterprise. Paragraph 44.6 states that the mere fact that a place is used by an individual to carry out activities related to the business should not lead to the automatic conclusion that it is a place of business of the enterprise, and that the answer depends on the facts and circumstances of each case.

The 50% working-time screen

This is the new number, and it is the single most useful thing in the update. Paragraph 44.8 provides that a home or other relevant place would generally not be considered a place of business of the enterprise if the individual worked from it for less than 50% of their total working time for that enterprise over any twelve-month period commencing or ending in the fiscal year concerned. It adds that exceptions to that approach are not anticipated to occur in most situations.

Paragraph 44.9 says the actual conduct of the individual determines the calculation of working time, with contracts and policies relevant only to the extent they correspond with actual conduct. So a policy document saying someone is office-based does not help if they are not.

Below 50%, the analysis effectively stops. At or above 50%, paragraph 44.10 sends you to the facts and circumstances, and paragraph 44.11 names the controlling factor: whether there is a commercial reason for the activities to be undertaken by that individual in the state where the home is located. A commercial reason exists where the individual's physical presence in that state itself facilitates the carrying on of the business, such as where there are people or resources in that state the enterprise needs access to.

The two negatives worth knowing

The update is unusually explicit about what is not a commercial reason, and both carve-outs cover the common cases.

Paragraph 44.15 states that a commercial reason will not exist where an enterprise enables an individual to work from home or another relevant place solely to obtain or retain the services of that individual. That is the ordinary case of letting a valued employee live where they want to live.

Paragraph 44.16 states that an enterprise permitting home working solely to reduce costs, for example reduced expenditure on office space, does so for that purpose and not because there is a commercial reason for the individual to perform activities in that state. That is the post-pandemic office closure.

Paragraph 44.19 closes the loop: where there is no commercial reason, the place would not be a place of business unless other facts and circumstances indicated otherwise.

Paragraph 44.17 lists what does indicate a commercial reason, including meetings with customers of the enterprise, cultivating a new customer base or identifying business opportunities, and real-time or near real-time interaction with customers or suppliers in different time zones. Paragraph 44.18 then warns against over-reading proximity: the mere presence of customers or suppliers in the state should not lead to the automatic conclusion that there is a commercial reason, and the same goes for a mere time-zone difference.

The sole trader is treated separately. Paragraph 44.20 says different considerations apply where an individual is the only or primary person conducting the business, giving the example of a non-resident consultant present for an extended period who carries on most of her own consulting business from a home office in that state. In that case the home office does constitute a place of business.

Paragraph 44.21 provides five illustrations, labelled A to E. They are illustrations rather than rules, and all are expressed in the absence of other facts and circumstances showing otherwise. The most instructive is example D: an individual working 60% of the time from home, client-facing but remotely, visiting a client in that state once a quarter, is held not to create a permanent establishment, because the visits are intermittent and incidental and the mere presence of clients does not supply a commercial reason.

Two further points. Paragraph 44.5 confirms that the Article 5(4) preparatory or auxiliary exclusion still applies on top, so even a home that is a place of business escapes permanent establishment status if the activities there are merely preparatory or auxiliary. And paragraph 44.3 confirms the test is applied period by period rather than by reference to how the business was run in the past or will be run in future.

While we are here: there is no universal 183-day permanent establishment threshold

This is the error we see most often, and the real picture is more interesting than a flat denial.

In the OECD Model, 183 days belongs to the employment article. Article 15(2)(a) turns on the recipient being present in the other state for periods not exceeding 183 days in any twelve-month period. Article 5 has nothing of the kind. Its only time test is the construction-site rule in Article 5(3), which provides that a building site or construction or installation project constitutes a permanent establishment only if it lasts more than twelve months. That is more than twelve months, not twelve months or more, measured per site or project rather than per person, and it has stood unchanged since the 1977 Model.

Where does 183 days come from, then? Three places, each of which gets over-generalised. There is an optional services provision in the Commentary to Article 5, at paragraph 144, which states are free to agree bilaterally and which uses 183 days together with a 50% of gross revenues test. There is the UN Model, which has a standalone services permanent establishment at more than 183 days in a twelve-month period, and a construction threshold of six months rather than twelve. And there are country reservations, including Australia's reservation to treat supervisory or consultancy activities exceeding 183 days in connection with a building site as a permanent establishment.

None of those is the OECD Model rule, and several countries reserve against the twelve months itself, preferring six.

One more correction before you plan around it

BEPS Action 7 did not change the construction-site rule, though a great deal of advisory material implies it did. The Model's own history notes show Action 7 amended Article 5(4), added 4.1, amended 5 and 6 and added 8. It left paragraphs 1, 2 and 3 alone.

Contract splitting was dealt with elsewhere: in the Commentary's abuse discussion, and in Article 14 of the Multilateral Instrument, which introduces a thirty-day aggregation trigger. That article is fully reservable, as are the other permanent establishment provisions in Part IV of the instrument, and each also requires matching notifications from both jurisdictions. Notably, the phrase minimum standard appears in the instrument only in the articles on treaty abuse and the mutual agreement procedure, never in Part IV. A jurisdiction can therefore decline the permanent establishment changes wholesale, which means the position is treaty-pair-specific rather than country-specific.

The practical consequence for anyone advising on remote work is that the analysis has two stages and both have changed. Start with the 50% screen and the commercial-reason test from the 2025 Commentary, then check whether the particular treaty actually contains the post-Action 7 agency and specific-activity wording at all. Our pieces on what the master file and local file must contain and on the method selection hierarchy cover the documentation and pricing sides of the same group of rules, and the threshold traps in country-by-country reporting are a reminder of how easily a number travels without its conditions. The authoritative text is the 2025 Full Version of the Model Tax Convention, and note that the 2025 Update changed the Commentary on Article 5 rather than the article itself.