Home office and permanent establishment – updated OECD Commentary

At the end of 2025, there was an amendment to Commentary on Article 5 of the OECD Model Convention concerning cross-border working from home or another place (e.g. a co-working space). One of the objectives of this measure was to clear up doubts about permanent establishment risk in situations where an international company hires employees working remotely from Poland. Was it achieved? To answer this question, we are checking what exactly changed and how it relates to the current position of the Polish tax authorities which determine whether a permanent establishment exists in accordance with corporate income tax regulations.

The foundations of this issue, related to the right to tax profits (and basic information on the permanent establishment) are presented in our earlier article, which explains what a permanent establishment is, how it is created, and what its implications are.

This article explores one of the most common causes for the creation of a permanent establishment of an international enterprise in Poland: when a foreign company hires employees who work remotely in Poland.

Disputes with the tax authorities highlight the uncertainty surrounding the permanent establishment

A review of administrative court judgments and rulings of the Head of the National Revenue Administration Information Centre (Polish: Krajowa Informacja Skarbowa) reveals numerous disputes and uncertainties concerning a variety of factual situations related to foreign enterprises hiring employees under remote working arrangements. Directors and managers of international enterprises are often uncertain whether hiring an employee working from another country might cause the creation of a permanent establishment and, consequently, additional tax obligations.

Fortunately, multiple judgments of administrative courts for example, the judgment of the Supreme Administrative Court of 28 October 2025, case no. II FSK 163/23, and the judgment of the Supreme Administrative Court of 19 February 2025, case no. II FSK 609/22, point out that hiring employees under home office arrangements does not in itself always cause a permanent establishment to exist.

As the judicial decisions state, a permanent establishment is not deemed to exist where the place used to carry out remote work is not owned by or under the control of the international enterprise, but the employee. It results in the absence of a fixed place of business, which is a necessary condition to deem a permanent establishment to exist. The problem is that it is very difficult to determine who has control of the place of work: the employer or the employee. Therefore, assessing the tax implications of remote working requires a detailed analysis of the individual situation, in particular the nature of the relationship between the international enterprise and the employee working under home office arrangements.

Did the latest update to the Commentary on the OECD Model Convention change the situation and clear up the doubts surrounding PE?

In view of continuing uncertainties as to interpretation and the growing popularity of remote working, the member countries of the Organisation for Economic Co-operation and Development (OECD) took steps to clarify the rules governing the interpretation of the relevant legislation. The works resulted in a recent update to the Commentary on the OECD Model Convention.

It introduces new guidelines designed to make it easier to determine whether carrying out remote work for a foreign employer could cause a permanent establishment in the employee’s country to exist. In particular, the following should be considered:

• The 50% threshold – according to the Commentary, if an employee works from home (or another relevant place) for less than 50% of their total working time over the course of a 12-month period, a permanent establishment is generally not created.
• A commercial reason – the OECD Model Convention states that even exceeding the 50% threshold does not automatically create a permanent establishment of the foreign employer. For this to occur, it is necessary to demonstrate that there is a commercial reason for the activities carried out by the employee at the given place, and that they facilitate the carrying on of the business of the enterprise to the extent that the place can be deemed to constitute a fixed place of business.

Furthermore, irrespective of whether the above conditions are met, a permanent establishment is generally not created if the work under home office arrangements:

• is not carried out on a permanent basis (as a rule, over the course of a 6-month period), or
• is limited to activities of a preparatory or auxiliary character.

Importantly, the above guidelines are already considered by the tax authorities in the most recent tax rulings (for example, the ruling of 1 April 2026, No. 0114-KDIP2-1.4010.35.2026.2.PP) and in the judgments of administrative courts (for example, the judgment of the Provincial Administrative Court in Gliwice of 8 May 2026, case No. I SA/Gl 962/25). 

These decisions confirm that, even though the OECD Model Convention is not a source of binding law, it has a significant impact on the interpretation of regulations and is frequently used by the tax authorities and administrative courts in analysing the facts of a case.

Doubts about the impact of remote working on tax establishment risk remain

The changes introduced by the Commentary on the OECD Model Convention should be viewed as a welcome development, as they provide further clarification of the rules and offer significant support in assessing the situation of international enterprises hiring employees working remotely in Poland.

However, a question remains: did the changes eliminate all the uncertainties as to interpretation? And unfortunately, we must say – as advisors with extensive experience in preparing permanent establishment risk analyses – that they did not.

The above criteria may be helpful in assessing less complex factual situations. However, more complex cases still require a thorough individual analysis.

This is even more significant because if the Polish authorities determine that remote work results in the existence of a permanent establishment, the international enterprise will have to comply with numerous obligations. In addition to paying corporate income tax, they will also be required to keep detailed records of revenue, file proper forms, and comply with the administrative obligations imposed by Polish law.

In practical terms, it might be necessary to seek support within the scope of CIT Compliance to adequately fulfil tax obligations in Poland and reduce the risks of errors which might lead to financial penalties.

If you have any concerns regarding potential permanent establishment risk, or if you are interested in ongoing support with corporate income tax matters in Poland, do not hesitate to contact the experts at RSM Poland. Our tax advisory team will be happy to answer any questions you may have and to suggest solutions and actions tailored to the individual needs of each taxpayer.