Cross-border homeworking has become a lasting feature of modern employment. This development has renewed attention in the interpretation of Article 5(1) of the OECD Model Convention (MC) and the circumstances in which a home office may constitute a permanent establishment (PE). The ‘fixed place of business’ test was traditionally closely linked to physical presence and disposal, and home offices were rarely treated as creating a PE, particularly when work was performed out of personal convenience. The OECD amended the Commentary to Article 5(1) in November 2025 when it introduced a 50% time indicator and a ‘commercial reasons’ criterion that was intended to clarify when cross-border homeworking may create a taxable presence.
This article assesses this Commentary update. It is argued that the 2025 update shifts the analysis from a control-based disposal test to a more functional assessment based on economic justification even though the Model text remains unchanged. Introducing a time threshold and a ‘commercial reasons’ filter reshape the fixed-place analysis and its interaction with Article 5(4). This enhances administrability, however, several questions remain open, and determining a PE remains a fact-intensive assessment grounded in the treaty and bilateral context.
Intertax