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An overview by STI Taxand, Taxand Cyprus
Christos Theophilou from our Cypriot member firm STI Taxand has recently published an article in Bloomberg Tax discussing The OECD’s 2025 update to the Commentary on Article 5 of its Model Tax Convention.
The update clarifies when a home or other non-employer-owned location may constitute a permanent establishment (PE) for cross-border workers. It introduces a 50% quantitative threshold, under which a location generally does not create a PE, and emphasises a “commercial reason” test to determine whether physical presence is necessary to carry on the enterprise’s business. Activities that are preparatory or auxiliary, or driven by personal choice or cost-saving, generally do not create a PE. The guidance shifts focus from legal control over the premises to operational necessity and working patterns, providing multinationals with clearer criteria to manage micro PE risk.
You can read the article in full here.
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