Workation and working from abroad
Assessing permanent establishment risks
Offering employees the option to work abroad helps businesses attract and retain talent. Before approving such arrangements, employers should assess the tax obligations that may arise in the country where the work is performed. Dr. Beata Baroth and the BBC European Tax team support businesses in reviewing and structuring these arrangements.
When can a home office be a fixed place permanent establishment?
Working from a private home abroad does not automatically create a permanent establishment. The relevant factors are the law of the country where the work is performed, the applicable tax treaty and the actual circumstances. Duration, regularity of use and whether the premises are at the enterprise’s disposal require particular attention.
The German tax authorities generally do not regard an employee’s home office as a permanent establishment of the employer. The absence of another workplace is generally insufficient on its own. The Federal Ministry of Finance guidance of 18 June 2026 also reflects the OECD’s 2025 clarifications: Working from a home office for less than 50 per cent of total working time over the relevant twelve-month period generally does not create a fixed place home office permanent establishment under a tax treaty. At higher levels, commercial reasons for working in that country are a key consideration. This does not establish a general safe harbour for all foreign tax obligations.
Assess contract activity and management functions separately
For executives, key account managers and sales staff, the risk of a dependent agent permanent establishment also requires assessment. Depending on the treaty, habitually concluding contracts or playing the principal role leading to contracts that the enterprise then concludes without material modification may be decisive. Isolated negotiations do not automatically have this effect. Management functions actually performed abroad also require a separate assessment.
What consequences may arise?
If a taxable permanent establishment exists, the profits attributable to it may be taxable abroad, and local registration, bookkeeping and filing obligations may arise. Failure to comply can lead to additional tax, interest or penalties, depending on the country. Double taxation disputes may require extensive coordination and, where appropriate, mutual agreement procedures.
Social security implications must be assessed independently. A temporary workation may qualify as a posting if the relevant conditions are met; an A1 certificate may be required within the European coordination framework. The existence of a tax permanent establishment does not determine this.
What a global mobility policy should cover
Businesses need a binding approval process before work abroad begins. A suitable policy defines permitted countries, individually assessed time limits, restrictions on activities and documentation requirements. Contract negotiations, authority to conclude contracts and management duties should be expressly addressed.
A blanket limit of 30 or 183 days does not replace this assessment. The 183-day rule generally concerns the taxation of employment income and applies only if further conditions are met. Permanent establishment risks and social security follow separate rules.
Plan international working arrangements in advance
BBC European Tax reviews existing and planned remote working arrangements and develops suitable policies together with businesses. This allows flexible working arrangements to be aligned with the requirements in the country concerned at an early stage.