Remote and hybrid working arrangements are now an established part of global workforce management. While the OECD's 2025 guidance provided greater clarity on permanent establishment (PE) risks associated with cross border remote working, employers should now be asking a different question: have their policies, approvals and risk assessments kept pace with the evolving workforce landscape?
Now that the guidance has had time to bed in, organisations should consider whether their current remote working policies and compliance frameworks still reflect the latest position.
Why Permanent Establishment Still Matters
A permanent establishment can arise when a business is considered to have a sufficient taxable presence in another country. In some circumstances, this can trigger local corporate tax filing obligations, compliance requirements and increased scrutiny from tax authorities.
More than ever, organisations need to understand where employees are working and assess the potential implications of those arrangements.
What Changed?
The OECD's updated guidance introduced a more structured framework for assessing when a remote working arrangement could create a permanent establishment. Key considerations include:
The guidance provides employers with a clearer framework for assessing risk, helping organisations move away from blanket restrictions and towards more informed decision making.
Have You Reviewed Existing Remote Working Arrangements?
For many organisations, the introduction of the OECD guidance may have reduced uncertainty. However, it has also highlighted the importance of understanding exactly where employees are working and why. Questions employers should be asking include:
Businesses that approved remote working requests several years ago may find that the circumstances have evolved significantly since the original assessment was completed.
Areas Often Overlooked by Employers
While the OECD guidance focused on permanent establishment risk, organisations should remember that cross border remote working can create a range of other obligations. These may include:
A remote worker may not create a permanent establishment, yet still trigger payroll, tax or employment compliance obligations in the host country.
Stephanie Smith, Head of Global Mobility at activpayroll, said: "Many organisations have become comfortable managing international remote workers, but few have taken the opportunity to revisit the arrangements put in place several years ago.
Practical Steps for Global Employers
Now is a good opportunity for organisations to revisit their international remote working frameworks and ensure they remain fit for purpose. Key actions may include:
As remote and hybrid working continue to evolve, maintaining visibility and control over employee locations remains critical to managing compliance risk across multiple jurisdictions.
How activpayroll Can Help
Managing a globally mobile workforce requires more than payroll compliance alone. Organisations must also consider tax, employment and corporate obligations across every location where employees work.
activpayroll supports organisations operating internationally with payroll, global mobility and workforce compliance solutions that help identify and manage risks associated with cross border working arrangements.
Regular reviews can help ensure international remote working arrangements remain compliant as business needs evolve. If you would like to assess your organisation’s exposure or review your current approach to international remote working, speak to our experts today.