New OECD guidelines on remote work from abroad – implications for employees and employers in Poland

Key changes in OECD guidelines and their impact on businesses

The OECD Commentary is not a formal source of law, but in practice, it is widely used by courts and tax authorities — also in Poland. Therefore, knowledge of its content is crucial, as in cross-border cases, it is often the OECD guidelines that shape the interpretation of tax regulations.

The update to the Commentary concerning, among others, Article 5 of the OECD Model Convention clarifies the rules and introduces practical guidelines, including determining whether an employee's home can become a “permanent place of business” for the employer, i.e. a permanent establishment.

Many of these guidelines have practical implications for typical employment situations, e.g. when an employee performs part of their duties from another country “incidentally” during a holiday stay, family visit, temporary relocation, or in a “work from anywhere” model.

Remote work from from abroad – when can a permanent establishment arise?

• Incidental or short-term work from abroad should generally not lead to the creation of a permanent establishment – the OECD indicates that an employee's home should generally not be considered a place of business for the enterprise if the employee works from it for less than 50% of the total working time over a 12-month period.
• The risk of creating a permanent establishment increases if the employer requires, accepts, or organizes work to be performed from the employee's home.
• A permanent establishment can arise even when the employee has the freedom to choose their place of work, if their work is crucial to the employer's business, and the employer actually benefits from the activities performed from abroad.
• Particularly sensitive are sales, management, negotiation functions, and ongoing operational support performed for a Polish company.
• The OECD emphasizes that a permanent establishment will not arise if the nature of the work is ancillary, supportive, or strictly auxiliary – but this assessment requires practical analysis.

The OECD pays particular attention to the so-called “commercial reason” for an employee's presence in a given country. The risk of creating a permanent establishment increases when the employee's presence is due to the employer's business needs – e.g. proximity to clients, the ability to provide services in a specific time zone, or servicing the local market. Conversely, if remote work from another country is purely personal – for example, for family reasons or lifestyle – the risk of creating a permanent establishment is significantly lower, even if the employee spends more than half of their working time outside Poland.

Foreign home office and taxation of employee remuneration

The OECD has clarified the rules for taxing employment in situations such as long-term work from abroad within a flexible work model, performing duties remotely during temporary or seasonal stays, carrying out tasks “incidentally” during private trips, as well as partial work from abroad without a formal change of tax residence.

This results in several important conclusions:

• if work is physically performed from another country, that country may acquire the right to tax the remuneration – regardless of the place of residence,
• short-term stays are still protected by the 183-day rule, but the OECD notes that many countries are increasingly monitoring the actual time of stay,
• work performed for an employer who has a permanent establishment in a given country may be taxed in that country regardless of the number of days,
• companies delegating employees or agreeing to work from abroad should verify where the actual “place of work” is, i.e. the physical location where the employee actually performs their work duties. In  case of remote work from abroad, it is this place - not the employer's location or the formal address indicated in the employment contract - that becomes crucial for determining the source country of income and assessing the right to tax the employee's remuneration.

What should employers do?

In light of the new OECD guidelines, companies should:

• analyze whether the foreign home office of employees does not create a permanent establishment,
• check which functions performed from abroad may be key or generate income,
• establish rules for controlling foreign stays and reporting working time from abroad,
• implement procedures for remote work performed from outside Poland,
• update policies regarding employee mobility and cooperation in the “work from anywhere” model,
• analyze whether the update to the OECD Commentary affects previous CIT, transfer pricing or group structures analyses.