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An overview by Herzog Fox & Neeman, Taxand Israel
The OECD has updated its Model Tax Convention to clarify when home offices may create a taxable presence (permanent establishment) for employers.
Generally, a home office won’t trigger a permanent establishment if an employee works less than 50% of their time in that country or if there’s no commercial reason for the work to be done there (for example, the work isn’t needed locally for the business).
Israel generally follows these rules but has added reservations, taking a stricter approach for certain cases, such as when key employees work remotely or provide client-facing services from Israel. The update helps multinationals plan for remote workers, but tax risks remain, especially in Israel. Meir Linzen, Guy Katz, Yuval Navot and Amir Cooper from our Israeli member firm Herzog Fox & Neeman have published a more detailed overview of the updates and its implications here.
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