The Commercial Reason Test

The idea

Paragraph 44.11 defines the test. A commercial reason exists where the physical presence of the individual in the country will itself facilitate the carrying on of the enterprise's business, for example because there are people or resources there that the enterprise needs access to.

The question is asked from the point of view of the business, not the employee. Paragraph 44.12 offers a useful check: if the home were not available, would the company make use of other premises in that country, such as a rented office? If the honest answer is yes, the company needs someone there, and the home is doing the job an office would do.

The indicators

Paragraph 44.17 lists activities which, when they take place and are made easier by the person working from that country or the same region, may show a commercial reason:

• Meetings between the individual and the company's customers.
• Building a new customer base or identifying business opportunities.
• Identifying new suppliers, managing supplier relationships, or handling contracts with suppliers.
• Real-time or near real-time interaction with customers or suppliers in different time zones, such as call-centre services or virtual technical or medical support.
• Access to know-how relevant to the business, such as regular meetings with a university research team.
• Collaboration with other businesses.
• Services for local customers that require physical presence, such as training or repairs on site.
• Interaction with employees and other personnel of the enterprise, or of associated enterprises.

The list applies equally whether the counterpart is a third party or a group company. One commercial reason among several motives is enough (44.13): the fact that the employee also wanted to live in Spain does not cancel a real business link.

Nor does the analysis ask whether the person's work is "productive". The Commentary treats it as axiomatic that every part of an enterprise contributes to the whole (44.13). The test is about the connection between the location and the business, not the value of the work.

What does not count

Talent. Paragraph 44.15 requires a link between the person's presence at the home and the business. There is none where the enterprise allows home working solely to obtain or retain that person's services. This is the paragraph most employers will rely on.

Cost. A company that permits home working solely to spend less on offices does so for that purpose (44.16). Nigeria recorded its disagreement with this point.

Mere presence of the market. Having customers, suppliers or an affiliate in the country does not, by that fact, supply a commercial reason. Neither does a different time zone (44.18). Israel reserved the right to find a commercial reason where a number of employees located in the country form a meaningful group relative to their business unit.

Occasional contact. Short occasional visits to a customer, or engagement that is minor in the context of the overall relationship, are not enough (44.14).

Where the line falls: three Spanish cases

The engineer. A back-end developer employed by a Dutch company lives in Málaga because he likes it. His team is in Amsterdam, his work has no customer contact, and the company has no market in Spain. He works 100 % from home. There is no commercial reason: his presence in Spain does nothing for the business that his presence anywhere else would not do.

The account manager. A British firm employs someone in Madrid to look after its three Spanish clients, whom she meets every month and whose renewals she handles. The company had been planning to open a small office. There is a commercial reason, and above 50 % her home is likely to be a place of business.

The support lead. A US company lets a support engineer move to Tenerife. He serves American customers by ticket and video call during his afternoon and evening. Is the time zone a commercial reason? If the company uses his location to extend its hours of coverage, the facts look like Example E. If he simply works US hours from Spain, as he would from Texas, the time zone is incidental and paragraph 44.18 applies. Same job title, different answer, decided by how the company actually uses the location.

The grey areas

Three indicators will generate most of the disputes:

• Interaction with the company's own staff or group companies. A second employee, or a local subsidiary, can change the picture. It is the least intuitive item on the list, and the one to watch when a company already has people in Spain.
• "Minor" engagement. Whether contact with a customer is minor depends on the whole relationship. A quarterly review meeting was treated as incidental in Example D, and Nigeria disagreed.
• "Other facts and circumstances". Even without a commercial reason, paragraph 44.19 leaves room for other facts to indicate a place of business. Israel has said it will look at whether the activity is core to the business or contributes significantly to value creation.

For how these fit into the whole analysis, go back to the main guide; for the practical steps, see the employer checklist.

Source: OECD (2026), Model Tax Convention on Income and on Capital 2025 (Full Version), Commentary on Article 5, paragraphs 44.1 to 44.21, added on 18 November 2025. The Commentary is described here in our own words; the paragraph numbers are given so that it can be checked against the original.