Home office as a permanent establishment in another State?

The OECD Model Tax Convention is a central basis for double taxation agreements. The Ministry of Finance has taken up the update and provides, in an information note of 4 January 2026, a summarising overview and examples of the new statements on home‑office permanent establishments.

A home office can in principle constitute a permanent establishment for a company (in another State) if the following conditions are met:

• The home office must represent a “fixed” business premises, i.e. the premises are operated for a certain duration.
  
  
• There must be no mere preparatory or auxiliary activity.
  
  
• It must be a business premises of the company, the activities in the home office must therefore be carried out for the company. An initial important indicator is that the relevant person spends at least 50 % of their working time within a twelve‑month period in the home office. If this working‑time indicator is met, it must further be examined whether there is an economic reason for the company to have the person work from the home office. Such an economic reason generally exists when the physical presence of the person in that State facilitates the conduct of the company’s business activities. This is the case, for example, when persons or resources required by the company are located in the home‑office State. An economic reason therefore exists, for instance, when the person contacts customers, suppliers, affiliated companies or other parties on behalf of the company and this contact is facilitated by the person’s presence in that State. It is therefore not sufficient that the company merely permits home office to satisfy the employee’s wishes.

To illustrate, the following example is given in the Ministry’s information note:

• An employee of RCo, a company of State R, works 80 % of their working time over a twelve‑month period from their flat in State S. They regularly visit RCo’s customers in State S to provide services.
  
  
• The flat in State S is to be regarded as a fixed premises and thus as a permanent establishment of RCo in State S, because the location is used for RCo’s business activities throughout the entire twelve‑month period and therefore shows a sufficient degree of permanence. The employee spends at least 50 % of their working time working from their flat in State S, and there is an economic reason for RCo for the person’s presence in State S. The provision of services by RCo to customers in State S is facilitated by the employee’s flat in State S.

The clarifying provisions on home‑office permanent establishments are effective from the beginning of 2026 for all Austrian double taxation agreements, provided they contain a comparable rule. Companies and employees with cross‑border home‑office arrangements should therefore review existing structures and, if necessary, make adjustments. In view of the complexity of cross‑border matters and possible tax consequences, we recommend our individual support.