In November 2025 the OECD rewrote its guidance on when a home office abroad becomes a taxable presence of the employer. For foreign companies with people working from Spain, it replaces years of uncertainty with two tests and five worked examples.
A software company in Austin hires an engineer who lives in Valencia. A London fund lets a portfolio manager relocate to Marbella. A Dutch scale-up allows its head of sales to move to Barcelona because her partner found a job there. In each case the company has no office, no branch and no intention of doing business in Spain. And in each case its finance director eventually asks the same thing: have we just created a permanent establishment?
The stakes are real. A permanent establishment means Spanish tax on the profit attributable to it, a Spanish tax registration, separate accounts, returns, and exposure to penalties for the years in which none of that was done. For most of the last decade the honest answer was "probably not, but nobody can be sure". The 2017 version of the OECD Commentary dealt with the home office in two short paragraphs built around the idea of a place being "at the disposal" of the enterprise, which tax authorities read in very different ways.
On 18 November 2025 the OECD Council adopted an update to the Model Tax Convention that replaces that guidance with twenty-one new paragraphs in the Commentary on Article 5, numbered 44.1 to 44.21, under the heading of cross-border working from a home or other relevant place. This guide explains what they say and how they are likely to work for people in Spain.
The guidance is about an individual who, typically for personal reasons, does all or part of their work for an enterprise of one country from a place in another country that is neither the enterprise's own premises nor those of a customer, supplier or group company. The Commentary gives the home as the obvious example and adds second homes, holiday rentals and the home of a friend or relative (paragraph 44.1). It calls all of these "other relevant places". A co-working desk rented by the employer is a different matter and falls under the ordinary rules.
The Commentary recognises that a home is unlike an office: colleagues cannot walk in, and it is under the control of the individual, not of the company (44.2). That is why it sets out considerations specific to this situation, while insisting that the outcome always depends on the facts of the period in question (44.3).
Read together, the new paragraphs produce a sequence of questions. A permanent establishment under Article 5(1) requires a "yes" to each of the first three, and a "no" to the fourth.
The first test is close to a safe harbour. A home or other relevant place would generally not be a place of business of the enterprise if the individual works from it for less than 50 % of their total working time for that enterprise, measured over any twelve-month period that begins or ends in the fiscal year concerned (44.8). The Commentary adds that exceptions are not expected in most situations.
What counts is what the person actually does. Contracts and remote-work policies help as evidence, but only to the extent that they match the real pattern (44.9).
For a hybrid employee who lives in Spain and commutes or travels to the employer's country for more than half of their working days, this test alone will usually settle the matter. For a fully remote employee in Spain, it will not: at 50 % or more, the answer depends on the facts and circumstances (44.10), and the second test comes into play. We look at how to count in the 50 % working-time test.
The Commentary describes the commercial reason as a prominent consideration (44.11). It exists where the individual's physical presence in that country itself helps the enterprise carry on its business, for instance because there are people or resources there that the business needs to reach.
The clearest case is direct engagement with customers, suppliers, group companies or others on the company's behalf, made easier by being in the country (44.12). The Commentary lists further indicators (44.17): meeting customers, developing a new customer base, finding and managing suppliers, real-time service to customers in other time zones, access to relevant know-how such as a university research group, collaboration with other businesses, on-site services for local customers, and interaction with the company's own staff or group companies there.
Equally important is what does not amount to a commercial reason:
Where there is no commercial reason, the home is not a place of business of the enterprise unless other facts point the other way (44.19). The detail is in the commercial reason test.
Paragraph 44.21 illustrates the tests with five cases, involving an employee of RCo, a company of State R, working from State S:
| Example | Facts | Outcome |
|---|---|---|
| A | Works from a rented place in State S for three consecutive months after a holiday | Not fixed: no permanent establishment |
| B | Works from home in State S one or two days a week all year: 30 % of working time | Fixed, but below 50 %: not a place of business |
| C | 80 % from home in State S, and regularly visits clients there to provide services | Commercial reason: permanent establishment |
| D | 60 % from home; serves clients everywhere remotely; one client visit a quarter | No commercial reason: no permanent establishment |
| E | Almost entirely from home, chosen so that customers in other time zones get real-time service | Commercial reason: permanent establishment |
Each conclusion is given "in the absence of other facts and circumstances showing otherwise". We go through them with Spanish scenarios in the five OECD examples explained.
The two tests are designed for an employee of a company whose business is run elsewhere. They do not protect someone who is the only person, or the main person, conducting the business. The Commentary's example is a non-resident consultant who spends an extended period in a country and runs most of her consulting business from an office in her home there: that home office is a place of business of the enterprise (44.20).
For founders, sole directors and owners of one-person companies who move to Spain, this is the paragraph that matters, and it sits alongside the separate question of whether the company itself has become resident in Spain. See founders, consultants and one-person companies.
Spain is a member of the OECD and entered no observation on paragraphs 44.1 to 44.21. Israel, the Czech Republic and Chile did, and India and Nigeria, among non-member economies, recorded disagreement. That matters for cases involving those countries.
The Commentary is not law. It is the agreed interpretation of the Model on which Spain's treaties are based, and Spanish tax authorities and courts rely on it constantly. There is, however, a live question about how far a Commentary adopted in 2025 can be used to interpret a treaty signed years earlier, on which the Spanish Supreme Court has been cautious. We deal with it in does the 2025 Commentary apply to Spain's existing treaties?
Before the update, the Spanish tax authorities had already taken a restrained line in published rulings on employees who chose to work from Spain for personal reasons, concluding that the home was not at the employer's disposal. The new text gives that position a firmer and more detailed footing, and at the same time makes clear when it stops applying.
Three things are often confused with the permanent establishment question and are independent of it:
For a foreign company with people in Spain, the update turns a vague risk into something that can be assessed and documented:
We set this out as a working document in a remote-work checklist for foreign employers. If the conclusion is that a permanent establishment exists, this is what follows. And where a visa is involved, see digital nomad visa, Beckham regime and the employer's risk.
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.
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