“Work from anywhere” sounds like the kind of employee perk that should make everyone happy.
Flexibility for the staff. Companies can tap into a broader talent pool. Senior Managers can work from another nation for a few months without taking a full leave of absence.
The trouble is that your employee could not be the only thing crossing a border.
Your company’s tax presence might even cross it.
One of the least understood hazards in international telecommuting is Permanent Establishment, or PE as it’s commonly known. A firm may be able to establish a taxable presence in another country without opening an office or forming a local subsidiary.
That doesn’t mean every employee working abroad creates a Permanent Establishment. The regulations are far subtler than that. But for firms with multinational teams, especially in sales, management or revenue generating jobs, it’s a risk worth considering.
What is a Permanent Establishment?
In simple words, a Permanent Establishment is a taxable presence that might occur when a business carries on its operation in another country through a sufficient level of presence there.
The OECD Model Tax Convention is built on the traditional idea of a permanent establishment through which a firm conducts its economic activities. Then tax treaties between countries define the application of those principles in practice.
The main takeaway for remote businesses: a foreign site does not have to look like a traditional office.
For instance, a home office can be relevant, depending on the circumstances.
The OECD particularly dealt with cross-border telework in its 2025 update, clarifying when working from a home or similar place can constitute a taxable presence. The guidance clarifies that merely working remotely from another country does not immediately establish a PE.
This distinction is crucial, because there is no general rule like:
“Employee works abroad 90 days = Permanent Establishment.”
It doesn’t operate quite so smoothly.
The Downsides of Work From Anywhere Policies
Imagine a London-based corporation.
It does not have any office in Spain.
Its Head of Sales plans to spend a few months working out of Barcelona. The employer has a generous work from anywhere policy and welcomes the arrangement.
At first sight, there is nothing extraordinary.
The employee is still paid on the UK payroll. Their work contract remains unchanged. The company has no offices for rent in Spain.
But what does that employee really do now?
They meet consumers in Spain.
They make business arrangements.
They build relationships with local prospects.
They’re working there on a permanent basis since the corporation is interested in having them in the Spanish market.
That’s a totally different circumstance than somebody spending a few weeks in Spain dealing with emails and internal meetings.
What the employee does is important.
Which Permanent Establishment Risk Employees are the Most High?
Not all remote employees are the same.
A software developer who works remotely from another nation for a short while may have a different risk profile than a sales executive who is frequently negotiating contracts with customers abroad.
Roles that should be examined more closely include:
Sales executives: Staff who negotiate or close contracts can raise increased agency-related concerns.
Country Managers: someone who is essentially running part of the company’s business from another jurisdiction may develop a better link to that market.
Senior Executives: The strategists or the local face of the organization should be subject to further scrutiny.
Revenue-Generating Teams: The risk posed by individuals whose core operations directly create business in the host country may be distinct from that posed by personnel performing internal support duties.
The OECD points out that cross-border remote employment might lead to PE issues both because the employee’s site of work may possibly be considered a fixed place of business and the employee’s activities may establish a dependent-agent PE.
But Time Matters, And There’s No Magic Number
This is where many work from anywhere policies go wrong.
Companies will sometimes make a rule such as;
‘Employees may work from another country for up to 90 days.’
Sounds good.
90 days is hardly a global PE safe harbour.
The relevant factors include the existing tax treaties, the activities of the employee, the rationale for the arrangement and the nature of the place of work.
The OECD’s recommendation for 2025 offers an essential practical signal in home-office circumstances. The conventional rule is that an individual operating from a house overseas for less than half of his or her total working time would not, in and of itself, make that home a business location. Even where the person is spending more time there, firms need to examine whether there is a commercial rationale for the job being done from that place.
Hence the proper question is not:
“Has the employee hit 90 days?
It is:
“What is the employee doing in this country, why are they doing it there, and what nexus does that create between the company and the jurisdiction?”
What Happens If You Create a Permanent Establishment?
The effects can reach way beyond filing taxes.
If a corporation has a taxable presence in another jurisdiction, it may be subject to local corporate income tax, reporting obligations and further tax administration. There may also be social security, payroll, employment and immigration ramifications, depending on the circumstances.
Financial impact can be substantial.
The corporation may need to calculate what profits are attributable to the overseas Permanent Establishment, and satisfy local tax responsibilities. Failing to recognise the problem early might lead to unanticipated obligations, penalties and expensive remedy.
Therefore, the PE is less about whether a particular individual should or should not travel, and more about how the organization as a whole manages its international workforce.
How to Mitigate Company Risk
A good work-from-anywhere policy has to do more than state where employees can go.
It should set up a process for evaluating foreign work.
- This can include:
What nations do you accept? - How long may an employee work in a certain country?
- Which positions deserve further review?
- Are employees able to negotiate/sign contracts when abroad?
- Does the company have any customers or commercial operations in that country?
- Does the employee require a visa or other work authorisation?
- Would the agreement give rise to any payroll, social security or corporation tax obligations?
A country risk matrix can assist HR teams make these judgements in a consistent manner, instead of reinventing the wheel on each request.
Deel’s own guidance on work-from-anywhere programs identifies four relevant compliance areas organisations need to consider: immigration, personal tax, corporate tax and social security, and Permanent Establishment.
How an Employer of Record Can Help
An Employer of Record is not a magic wand that makes all tax and immigration issues disappear. But it can transform the employment structure and mitigate some of the hazards of directly employing someone in a foreign country.
Rather to the employee being directly employed by the company’s home-country business, an EOR employs the worker via a local entity in the nation they are working.
This means the corporation has local employment infrastructure, rather than trying to handle a foreign employment relationship from the home office.
Deel’s EOR model is described as a way to hire worldwide without a local legal entity, but its PE guideline refers to localised employment, payroll, statutory benefits and local compliance help as part of the risk-management approach.
who can be a lot cleaner basis for organisations who hire globally often than enabling people to work abroad informally and praying the arrangement never draws tax notice.
The Bottom Line
Work-from-anywhere rules are appealing because they provide freedom to employees.
But international flexibility requires guardrails.
A temporary employee working in another nation for a few weeks to respond to emails does not necessarily form a Permanent Establishment. At the same hand, a top employee who spends a lot of time abroad while performing commercially vital operations can make a considerably more convoluted tax picture.
The worst thing of all is to view PE as a simple matter of counting days.
It is not so.
Commercial reason for the arrangement, country, tax treaty, where the work is being done, function of the employee, activities being performed all important.
For organisations that are putting together international teams, it’s smarter to identify these hazards before sanctioning cross-border work, rather than finding out after the individual has been working abroad for months.
Whether your firm is developing a work-from-anywhere policy or employing staff overseas, Deel can help you navigate the employment, payroll, immigration and compliance aspects of the arrangement through its global workforce infrastructure.
FR 
EN