Introduction

On November 19, 2025, the OECD released its long-awaited update to Model Tax Convention (OECD MTC) which will be included in the condensed and full editions of the OECD MTC to be published during 2026. This much-anticipated update brings three types of modifications to the Model Tax Convention: (a) a new paragraph 6 which is added to Article 25 on the Mutual Agreement Procedure (MAP); (2) updated commentary to some of the articles of the OECD MTC; and finally (c) revised reservations and positions by OECD and non-OECD member countries. These modifications have been analyzed in our tax alert.[1]

Likely, the most impactful OECD MTC update to businesses is the revised guidance provided to Article 5 and the circumstances under which cross-border work from home or other relevant place may give rise to a Permanent Establishment (PE). This is an important update as home offices became far more common in post-COVID-19 while the former guidance provided in the Model Tax Convention was not entirely adequate to address this new reality.

Background

The allocation of taxing rights regarding business profits is provided in Article 7 of the OECD MTC, which determines that the taxation at source can only occur if a nonresident enterprise carries its activities in the other (source) state through a PE located therein. The concept of PE is stipulated in Article 5. Paragraph 1 requires that the following conditions must be met: (i) there needs to be a fixed place of business (geographical link); (ii) with a certain degree of permanency (temporal link); (iii) that place needs to be at the disposal of the enterprise; and (iv) the business activity of the enterprise must be carried out through that fixed place of business. In addition, and for PE to exist, the activities carried out through the fixed place of business must not be of preparatory or auxiliary character as provided in paragraph 4 of Article 5. This paragraph provides a list of activities that are treated as an exception as they are not sufficient to give rise to PE.

In the 2017 Update to the OECD MTC, paragraphs 18 and 19 were added to address home office PE situations[2]. These paragraphs were introduced to clarify the “at the disposal” PE test in the context of home office, requiring two conditions: (i) the home office was used on a continuous basis for carrying the activities of the enterprise; and (ii) it was clear from the facts and circumstances that working from home office had been required by the enterprise[3].

The 2025 Updated Guidance: General Remarks

The updated guidance starts by noting that determining whether there is a PE is based on facts and circumstances. The existence of PE is, first of all, based on the general tests of whether there is a fixed place of business with a sufficient degree of permanency. The interpretation of the meaning of both fixed place and permanency tests follows the guidance that was already provided in the prior versions of Commentary. The nuance comes now from the fact that, the at the disposal test appears no longer to be relevant for assessing whether there is a home office PE. This is justified since, in the context of home office, the at the disposal test was misadjusted as it requires access to the premises by other persons working for the enterprise, something that typically does not occur in the home office context. This is precisely the reason why former paragraphs 18 and 19 of the Commentary—which discuss the at the disposal test in the home office context—have now been deleted. The updated Commentary stresses that home office (or other relevant place) have features that distinguish them from the use of other places by an enterprise.^[4] Therefore, the updated commentary revamped the key considerations for a PE in the context of cross-border home office work requiring: (1) continuity of use and (2) the existence of a commercial reason for the individual’s physical presence in the state. This is coupled with five illustrative examples of situations that may (or may not) give rise to a PE.

Not Merely Incidental: 50% Threshold as a Gateway Test

The revised Commentary emphasizes that activities carried out at home or another location must not be intermittent or incidental. As mentioned earlier, this condition was already provided in the 2017 update to the OECD MTC: A home office will only constitute a PE if it is used continuously over an extended period. The 2025 update now introduces a practical threshold: Where an individual works from home for less than 50% of their total working time over a 12-month period, the location is generally not regarded as a PE.^[5] This determination is based on actual conduct and formal agreements only matter to the extent they reflect reality.

This 50% threshold effectively works as a “gateway criterion”: If this threshold is not exceeded there is no PE. If it is exceeded, then we need to turn to the second test to assess whether there is a place of business of the enterprise: the commercial reason for presence.

Commercial Reason for Presence

A place of business requires a commercial reason for the individual’s presence in the jurisdiction. Such a reason exists where physical presence directly facilitates the carrying on of the enterprise’s business, such as people or resources to which the enterprise needs access for the performance of its activities.^[6] Other examples may be interacting with customers, suppliers, associated enterprises, or other stakeholders in that country. Conversely, if remote work is permitted solely to hire or retain talent, without a business-driven need for presence, or if it is allowed solely to reduce costs (such as expenses with office spaces), no commercial reason exists for PE purposes.^[7]

Indicators of Commercial Reason

A commercial reason may be present where activities such as the following are facilitated by the worker’s presence:^[8]

• Meetings between the individual and clients
• Cultivation of a new customer base or identification of business opportunities
• Real-time or near real-time interaction with customers or suppliers in different time zones (for example, call center services, virtual IT support, or medical services)
• Access to business-relevant expertise (such as meetings with university personnel conducting research relevant to the enterprise)
• Collaboration with other businesses
• Performance of services for clients when those services require physical presence
• Interaction with other employees or personnel of the enterprise or associated enterprises

These factors help distinguish business-driven arrangements from those motivated purely by employee convenience. In any event, the list of exclusions for preparatory or auxiliary activities (as set out in paragraph 4) continues to apply, meaning not all remote activities will give rise to a PE.^[9]

The updated Commentary also highlights that different considerations apply in particular circumstances where the individual is the only or the primary person conducting the business of an enterprise. An example would be the one of a nonresident consultant who is present for an extended period of time in one state to carry most of the activity of its owned consulting firm from an office set up in her home in that state.^[10] In those circumstances, the home office may be considered as a PE.

Some Countries Disagree With the Updated Guidance

Some countries expressed their disagreement with the updated guidance on home office PE by introducing observations (in case of OECD Member Countries: Chile, Czech Republic, and Israel) or positions (non-OECD Member Countries: India, Malaysia, and Nigeria) to the 2025 OECD MTC. Those countries do not share some or all the content of the commentary on the circumstances giving rise to home office PE. For instance, India disagrees with the time threshold and commercial reason tests considering that, as long as the individual carries out business activities of an enterprise, then the individual’s home should be considered at the enterprise’s disposal, and therefore a PE.^[11]

What’s Next for Global Mobility?

With PE rules for home office clarified, attention is turning to broader global mobility implications. This takes into account that global mobility of individuals may present itself in different forms such as digital nomads, frontier workers, workers who perform their activities in the same jurisdiction as the employer but also temporarily or regularly work in another jurisdiction, or workers who perform activities in a different jurisdiction from the one of residence of the employer but also perform some activities there. These different categories of cross-border work pose different types of questions both from personal income tax and corporate income tax perspectives. In this context the OECD has initiated a public consultation aimed at addressing a range of complex issues emerging as cross-border and multi-location working grows.^[12] These issues include:

• Tax residence of individuals working across multiple jurisdictions
• Allocation and taxation of employment income
• Compliance and administration issues for individuals working in jurisdictions different to that in which the employer is located
• Social security implications for mobile workforces
• Special tax regimes such as expat or digital nomad regimes
• Interaction between PE rules and teleworking
• Attribution of profits to PEs created by remote workers
• Transfer pricing related issues
• PE issues beyond home office such as dependent agency PE or services PE
• Corporate tax residence for executives working abroad

The purpose of this public consultation is to provide information and input, and gather evidence and experience from stakeholders that allow the Inclusive Framework to identify the most significant treaty issues arising from these trends, ensuring future OECD work is focused and internationally aligned. The deadline for submitting comments to the OECD on this consultation is December 22, 2025.

Conclusion

The 2025 update to the OECD MTC marks a significant step forward in addressing modern tax challenges arising from global mobility. By clarifying PE rules for cross-border home office the update provides much-needed certainty for tax administrations and multinational businesses alike. It also signals the OECD’s ongoing commitment to adapting international tax rules to technological change, digital mobility, and the realities of a globalized workforce as reflected in public consultation.

As these workstreams progress and further guidance is released, it is essential that taxpayers closely monitor developments. Changes in treaty interpretation and administrative practice could materially affect tax positions, cross-border structuring, and operational footprints. A&M will keep stakeholders informed and prepared for the evolving landscape.

USA

November 10, 2025: IRS Establishes Safe Harbor for Investment Trusts Engaged in Digital Asset Staking[13]

The IRS has issued Revenue Procedure 2025-31, creating a safe harbor for fixed investment trusts to stake digital assets without losing their tax status as investment or grantor trusts. The guidance outlines 14 conditions, including limits on trust activities, asset custody requirements, and quarterly distribution of staking rewards. The safe harbor applies to tax years ending on or after November 10, 2025, with a nine-month window for existing trusts to amend agreements.

Canada

November 20, 2025: Key Highlights of Tax Amendments in Canada’s Budget 2025[14]^,[15]

Canada tabled the Federal Budget on November 4, 2025. Among other things, the Budget proposes key changes for: transfer pricing rules to align with OECD by introducing a single arm’s length standard; dividend refund restrictions in tiered Canadian-controlled private corporations (CCPCs) structures; and phase out of Canada Carbon Rebate. Canada further proposed to repeal Digital Services Tax Act under the Budget Implementation Bill.

Poland

November 5, 2025: Public Consultation Opens on Draft GloBE Information Return Form[16]

The Ministry of Finance launched a public consultation on proposed GloBE Information Return (GIR) form on November 5, 2025. Polish group entities are required to file GIR form on Top-up Tax within 15 months after the end of the relevant tax year which is intended to provide tax authorities with standardized data to verify top-up tax calculations. The consultation ended on November 17, 2025.

November 7, 2025: Polish Parliament Extends CIT Exemption to Non-EU/EEA Investments, Pension Funds, and to Self-Managed Funds[17]

The Parliament passed the law expanding corporate income tax exemption currently availed by Polish and EU/EEA investment and pension funds to non-EU/EEA jurisdictions. The amendment also extends the benefit to self-managed investment funds, bringing Polish domestic law in line with rulings of the Court of Justice of the European Union. The text was adopted by Parliament on November 7, 2025, and has been submitted to the President for signature. The amendments are scheduled to take effect on January 1, 2026, once signed and published.

Portugal

November 7, 2025: Parliament Enacts Phased Reduction of Corporate Income Tax[18]

Parliament enacted Law No. 64/2025, setting out a phased reduction in Portugal’s corporate-income tax (CIT) rate from 20% to 17% with: 19% for tax periods beginning in 2026; 18% for periods beginning in 2027; and 17% for periods beginning on or after January 1, 2028. The law also introduces a reduced rate of 15% on the first EUR 50,000 of taxable income for small or medium-sized enterprises and small-mid cap companies that primarily carry out agricultural, commercial, or industrial activities and balance above EUR 50,000, taxable at 17% (applicable to tax periods beginning on or after January 1, 2026).

Belgium

November 17, 2025: Belgium Extends QDMTT Filing Deadline to June 30, 2026[19]

The Belgian Ministry of Finance extended the deadline for filing the annual Qualified Minimum Domestic Top-up Tax return for a tax year ending on December 31, 2024, along with all returns relating to the supplementary national tax with statutory filing deadlines falling up to June 30, 2026, to June 30, 2026, ensuring consistency with filing timelines in other EU Member States.

Italy

October 31, 2025: Italy Publishes Instructions on the GIR Filing[20]

The Finance Department issued instructions explaining the step-by-step process for completing the GIR set out in Annex 1 of the Ministerial Decree dated October 16, 2025. The guidance briefly outlines the required entries for MNE/group information, jurisdictional safe-harbors and exclusions, and computation including instructions with respect to details to be entered in each section or table in line with Administrative Guidance issued by the OECD.

Finland

November 10, 2025: Holds Public Consultation on Amendments to Pillar Two Law; Proposals Include Advance Rulings and Retroactive Effect to 2024[21]

The Ministry has proposed a set of amendments to Finland’s domestic minimum-tax law to align it with the Inclusive Framework’s administrative guidance. The draft also proposes introduction of a formal route to seek preliminary ruling from the Tax Administration on certain situations under global minimum tax. The proposed changes apply to and include the income year 2024. The consultation ended on November 19, 2025.

November 12, 2025: Government Proposes Parliament for Legislation on Allocation of Income to Permanent Establishments[22]

Bill HE 164/2025 has been submitted to Parliament to align domestic profit attribution rules for permanent establishments with the Authorized OECD Approach. The measure is targeted to take effect on January 1, 2027, and follows the draft proposal published for consultation on June 30, 2025.

November 25, 2025: Finland Issues Revised Guidance on Pillar Two Allocation Rules for PEs, CFCs, and Hybrids[23]

The Finnish Tax Administration has issued an updated guidance for Pillar Two purposes clarifying the distribution of profits, losses, and relevant taxes between group entities, including permanent establishments, controlled foreign corporations, and hybrid/transparent entities, supported by various examples to aid practical application.

Netherlands

November 27, 2025: Netherlands Advances Pillar Two Amendments and DAC9 Legislation[24]
 

The Lower House approved a package of amendments to the Minimum Tax Act and published a bill to enact DAC9. Key changes to the Minimum Tax Act include introducing definitions for flow-through and hybrid entities, excluding pre-transition deferred tax assets from subsequent effective tax rate calculations, and clarifying the qualification of joint ventures and their associated parties as group entities. Further updates were approved by Lower House for rules for determining GloBE income and covered taxes, revised scope of net tax expense, and utilization of deferred tax assets exclusion in calculation of simplified covered taxes, among other things. Lastly, a separate bill has been issued to implement DAC9 to streamline the filing and information exchange.

Hungary

November 1, 2025: Hungary Signs the GIR MCAA to Enable Automatic Exchange of GloBE Information Under Pillar Two[25]

Hungary signed the Multilateral Competent Authority Agreement on the Exchange of GloBE Information (GIR MCAA), facilitating automatic exchange of the GloBE information. The GIR MCAA is a Qualifying Competent Authority Agreement under the GloBE Model Rules, signed by 22 jurisdictions as of November 5, 2025.

November 1, 2025: Hungary Ratifies CARF MCAA, DPI MCAA, and CRS MCAA Addendum[26]

The President signed three laws, published in Magyar Közlöny No. 127 on October 31, 2025, ratifying: (i) the CARF MCAA (automatic exchange under the Crypto-Asset Reporting Framework), (ii) the DPI MCAA (automatic exchange for income earned via digital platforms), and (iii) the Addendum to the CRS MCAA (extensions to financial-account exchange). Each law includes the list of jurisdictions under Section 7 of the respective MCAA; the entry-into-force dates will be announced by notice in the Official Gazette when determined.

United Kingdom

November 26, 2025: UK Proposes Budget 2025[27]

The Chancellor presented Budget 2025 on November 26, 2025. The Budget proposes changes in business taxes, personal taxes, capital gains tax, inheritance tax, and property taxes, among other things.

Please refer to the A&M Tax alert[28] for details of the proposed amendments. 

Malaysia

November 5, 2025: Guidelines on Fit and Proper Full-Time Employees in Labuan[29]

The Inland Revenue Board of Malaysia issued guidelines elaborating “Fit and Proper Full-Time Employee” for Labuan entities. This replaces the earlier definition of a full-time employee. Under the revised rules, among other things, an employee must be competent, work physically in Labuan, and hold roles that are directly relevant to the entity’s business activities. Labuan entities must also meet the required operating expenditure and staffing levels. Failure to comply may result in the loss of Labuan’s preferential tax benefits and the entity being taxed under Malaysia’s normal corporate tax regime.

November 18, 2025: Malaysia Tables the Finance Bill 2025 and Measures for the Collection, Administration, and Enforcement of Tax Bill 2025[30]

Malaysia has proposed tax amendments in the bills tabled before the Parliament. Among other things, it proposes a 2% tax on profit distributions exceeding MYR 100,000 received by individual partners of LLPs, whether paid in cash or in kind. Further, it also proposes revisions to the definition of “disposal” for capital gains and updated rules for nominee-held assets. Further, changes cover the Real Property Gains Tax Act to limit the carry-forward period for losses to 10 years. Amendments to the Stamp Act 1949 increase penalties for under-stamped instruments and revise definitions related to residential property.

Singapore

November 19, 2025: Singapore Introduces New Simplified Transfer Pricing (TP) Approach for Marketing and Distribution Activities[31]

The Inland Revenue Authority of Singapore (IRAS) has released the eighth edition of Transfer Pricing (TP) Guidelines, introducing a new OECD-endorsed Simplified and Streamlined Approach (SSA) for baseline marketing and distribution transactions between related parties.[32] The SSA allows eligible taxpayers to apply a simplified arm’s-length price for qualifying transactions for financial years from January 1, 2026, to December 31, 2028. Taxpayers not opting for the SSA must continue determining arm’s-length prices under regular TP methods. The guidelines also highlight cross-border considerations, including potential double taxation if foreign tax authorities do not accept the SSA.

Japan

November 1, 2025: Japan Updates FAQs for Global Minimum Tax[33]

Japan’s tax authority updated its global minimum tax FAQs for global minimum tax introducing a split into two versions covering fiscal years April 1, 2024, to March 31, 2025, and April 1, 2025, to March 31, 2026. The earlier version received only minor technical clarifications, while the later version includes updates from the 2025 reforms, including OECD administrative guidance issued in June 2024, and adds examples on deferred and current tax pushdown and the five-year recapture rule.

UAE

November 8, 2025: OECD’s Enhanced CRS to Be Implemented by UAE Starting 2027[34]

The UAE Ministry of Finance has announced its intention to implement the revised Common Reporting Standard (CRS 2.0) starting January 1, 2027, with the first automatic exchange of information scheduled for 2028. CRS 2.0 expands its scope to include electronic money, digital currencies of central banks, and certain activities related to crypto assets, and provides additional requirements for auditing and reporting.

Australia

November 1, 2025: ATO Publishes Draft Guidance on CbC Reporting[35]

The Australian Taxation Office (ATO) released draft instructions on October 31, 2025, for completing the public country-by-country (CbC) report, requiring large multinational enterprises with significant Australian-sourced income—both domestic and foreign headquartered—to publicly disclose tax and related information. The rules mandate disclosures on a per-country or aggregated basis, along with a statement on the entity’s overall tax approach, covering jurisdictions listed in the 2024 Determination, including Singapore, Switzerland, and Hong Kong. Additionally, the ATO published the final Business Implementation Guide, reporting schema, XML Message Structure Table, and sample XML files to support electronic filing of public CbC reports.

November 18, 2025: ATO Grants Extra Time for Filing 2024 CbC Reports[36]

On November 18, 2025, the ATO announced an extension for CbC reporting. Entities with reporting period ending on December 31, 2024, now have time until January 30, 2026, to submit their CbC statements, replacing the earlier deadline of December 31, 2025.

November 26, 2025: ATO Releases Final Practical Guidance on Minimum Tax Filing Rules During Transition[37]

On November 26, 2025, the ATO released Practical Compliance Guideline PCG 2025/4. The guideline explains Australia’s approach to enforcing lodgment obligations under the new 15% global and domestic minimum tax, aligned with the OECD’s GloBE Rules under Pillar Two. It sets out an administrative framework for managing penalties during a transition period, aiming to help multinational enterprise groups comply while maintaining consistency with the law. Effective from January 1, 2024, it applies to fiscal years starting on or before December 31, 2026, and ending by June 30, 2028, and will be reviewed continuously. The guideline supplements existing ATO guidance but does not alter legal obligations or interpretations.

New Zealand

November 17, 2025: Inland Revenue Seeks Feedback on Tax Treatment of Software and SaaS Costs[38]

On November 17, 2025, Inland Revenue opened public consultation on the tax treatment of costs related to software development and software as a service (SaaS) customization. The review covers expenses for developing software for sale or licensing and costs for configuring third-party SaaS platforms. The Inland Revenue is concerned that the current rules may impose unnecessary compliance burdens, create uncertainty, and lead to nondeductible “blackhole” expenditure. Feedback is invited until January 30, 2026.

• The United States and China finalized a major trade agreement during President Trump’s visit to South Korea. China committed to halting fentanyl precursor exports, lifting rare earth and critical mineral export controls, ending retaliatory tariffs and non-tariff measures, reopening markets for US agriculture, and resuming semiconductor and chip-related trade. It will also purchase large volumes of US soybeans through 2028 and terminate investigations targeting US firms. In return, the US will reduce certain tariffs, extend Section 301 exclusions, and suspend enforcement of specific trade restrictions for one year while continuing negotiations. From November 10, 2025, 24% tariff on all US imports will be lifted for one year, while the 10% base tariff continues to apply.[39]^,[40],[41]
• The United States and Guatemala have agreed on a framework for a reciprocal trade agreement. Guatemala will eliminate non-tariff barriers, simplify regulatory approvals for some US exports, remove restrictions on remanufactured goods, accept US automotive standards, and improve agricultural market access. It will also enhance intellectual property protections, facilitate digital trade without discriminatory taxes, enforce labor rights by banning imports produced with forced labor, and adopt strong environmental measures to combat illegal logging, wildlife trade, and mining. In return, the United States will remove reciprocal tariffs on exports, including textiles and apparel, and maintain a 10 percent tariff on other goods during the suspension period.[42]
• The United States and Ecuador have agreed on a reciprocal trade framework to expand market access and strengthen economic and security cooperation. Ecuador will cut tariffs on machinery, health products, technology goods, chemicals, vehicles, and some agricultural products, while removing non-tariff barriers and improving rules on intellectual property, labor, environment, and digital trade. In return, the United States will eliminate tariffs on qualifying Ecuadorian exports. Both nations will finalize the agreement and monitor progress through their Trade and Investment Council.^[43]
• The United States and Argentina agreed on a trade and investment framework to expand market access and cooperation. Argentina will cut tariffs on US goods, remove non-tariff barriers, improve intellectual property enforcement, open agricultural markets, and support digital trade. The United States will eliminate tariffs on certain Argentine exports. Both countries will finalize the agreement and monitor progress through joint forums.[44]
• The United States and the Republic of Korea agreed to strengthen reciprocal trade under the Korea Strategic Trade and Investment deal. The United States will apply either the existing U.S.-Korea Free Trade Agreement or Most Favored Nation tariff rate, or a 15 percent tariff on Korean-origin goods, and reduce Section 232 tariffs on automobiles, auto parts, timber, and wood products to a combined maximum of 15 percent. Tariffs on pharmaceuticals and semiconductors will be capped at 15 percent, and supplemental tariffs on certain products, including generic pharmaceuticals and natural resources, will be removed. Korea will eliminate non-tariff barriers, improve market access for US vehicles and agricultural products, and reduce regulatory burdens to promote fair and reciprocal trade.[45]
• The United States has exempted 237 agricultural product classifications and 11 special categories from reciprocal tariffs effective November 13, 2025, under an executive order by President Trump. Key products now exempt include coffee, tea, tropical fruits, cocoa, spices, beef, and certain religious-use goods.[46]