Vamoz | Permanent Establishment: Business Trips & Workations

The short answer: it depends. The OECD has set out a clear framework, but there is no guarantee that short stays are risk-free. Depending on the role, activities and country, even a short trip can be enough. To stay on the safe side, every case still needs an individual assessment.

Three days of client meetings in Munich, a month of workation in Lisbon, then regular visits to family in Milan: working abroad has become everyday life for many employees. Most HR teams already keep visa and social security requirements in mind. One question often receives less attention: could a stay abroad also mean that your company has to pay corporate income tax there?

This is exactly what the OECD sought to address in November 2025. On 30 September 2026, it published the full version of the 2025 Model Tax Convention, including the new guidance on remote work. Tax authorities around the world use this reference to interpret double taxation agreements. It is time to take a closer look and explain how Vamoz helps you keep these cases under control.

What is a permanent establishment, and why is it expensive?

A permanent establishment is a fixed place of business through which an enterprise carries on all or part of its activities (Article 5 of the OECD Model Tax Convention). Usually, this is an office, branch or workshop. In certain circumstances, however, an employee’s home abroad can also qualify.

If a permanent establishment arises, the other country may tax the profits attributable to it. The consequences for your company include:

Registration and tax returns abroad
Allocating profits between the head office and the permanent establishment
Additional payroll and reporting obligations, depending on the country
Back taxes, interest and penalties if the issue comes to light during an audit

A permanent establishment arises from the actual circumstances, rather than from registration. We explain how quickly short stays can add up in How Employee Travel Creates Accumulated Presence Risks for Employers.

What the OECD guidance clarifies

The OECD Council adopted the 2025 update on 18 November 2025. A detailed new section in the commentary on Article 5 addresses working from home, holiday accommodation or another location abroad.

The assessment follows two steps:

The 50% threshold: If a person works from that location for less than 50% of their total working time in any 12-month period, it will generally not be a place of business of the enterprise.
Commercial reason: At 50% or more, all circumstances matter, including the permanence of the use of that location and, above all, whether there is a commercial reason for the person’s presence in that particular country. This may be the case when the person serves customers or suppliers there and thereby advances the company’s business.

The OECD explicitly identifies reasons that do not count as commercial reasons: an employee’s wish to work abroad, attracting and retaining talent, or saving office costs. A workation offered as an employee benefit does not, by itself, provide a commercial reason. Business trips can be different: negotiating or concluding contracts abroad can create a risk independently of the 50% threshold. More on this below.

What this means for workations and business trips

The commentary includes several examples. Applied to typical situations, they look like this:

Situation	Working time at the location (12 months)	Commercial reason?	Permanent establishment?
Three months in a rented apartment following a holiday	Below 50%	No	No, the necessary permanence is missing
One to two days per week from the same accommodation abroad, around 30% over the year	Below 50%	No	Generally no
60% from the same accommodation abroad, with only occasional local client meetings	Above 50%	Insufficient	Generally no
80% from the same accommodation abroad, with regular local client visits	Above 50%	Yes	Likely yes
Almost exclusively from the same accommodation abroad to serve customers in their time zone	Above 50%	Yes	Likely yes

At first glance, a typical workation may therefore seem harmless. But the table only addresses a fixed place of business, and only one person at one location. In practice, the role, activities on site and country also matter. The next section explains why.

Why even short trips can create a permanent establishment

1. Dependent agent permanent establishment. The guidance concerns a fixed place of business. Someone who concludes contracts abroad or plays a decisive role in negotiating them can create a dependent agent permanent establishment (Article 5(5)), even without a fixed office. There is no 50% threshold here: depending on the country, repeated short business trips involving contract negotiations may be enough. Travelling sales and management roles therefore need particular attention.

2. Several people, one country. The 50% test applies per person and location. When several employees regularly work in the same country, authorities still consider the overall picture. Some double taxation agreements also recognise a service permanent establishment: if your company provides services there for an extended period, many short business trips by different employees may be added together.

3. Commentary is not law. The OECD commentary is an interpretation aid, rather than binding law. Some countries have entered reservations. Others apply it in part: Austria has raised its threshold from 25% to 50%, while Germany has so far mainly applied the new criteria to outbound cases and continues to focus on the employer’s control over the location in inbound cases.

4. Other obligations remain. Even without a permanent establishment, payroll tax, social security (including A1 certificates), immigration and data protection requirements may apply. And the 183-day rule concerns employee taxation, rather than company taxation.

When a few travel days are enough

Imagine a Zurich software company sending its key account manager to Germany ten times over the year for two to three days each time. She has authority to conclude contracts on behalf of the company and regularly exercises that authority during her visits to Germany. She negotiates contract terms with a major customer and signs those contracts for the company. Altogether, this amounts to around 25 days, well below any 50% threshold.

Nevertheless, the German tax authorities could consider this a dependent agent permanent establishment. Part of the profit from the customer contract would then be taxable in Germany, with registration, tax returns and possible back taxes to follow.

By comparison, a developer at the same company spends four weeks on workation in Portugal without contact with local customers. This is generally unproblematic. Duration alone is therefore not decisive: what the person does on site matters. That is exactly why each case needs to be assessed individually.

Our recommendation

Blanket rules fall short. Whether a stay is critical depends on several interacting factors that can change with every trip. Every assessment should therefore answer these questions:

Who is travelling? Role and authority: does the person negotiate or sign contracts?
What happens on site? Client meetings, project work, services for local customers or simply working on a laptop?
Where? Which double taxation agreement applies?
How long and how often? Working days per person and country over a rolling 12-month period.
Who else? Other employees in the same country and their accumulated days.
Is everything documented? The purpose of the trip, approval and location.

Excel spreadsheets and email approvals struggle to handle this once more than a handful of employees are travelling. Software can automatically check every request against these criteria, add up days per country and provide timely warnings before a threshold is crossed. It also automatically produces the documentation you may need to present if the issue arises.

How Vamoz supports you

Vamoz combines software with compliance expertise so that you do not have to assess business trips and workations manually. Our platform offers:

Automatic risk assessments before every business trip or workation, including permanent establishment risks, tax and social security
Day tracking per person and country, including accumulated presence across multiple employees
Warnings before critical thresholds are reached
Clear approval processes for HR and managers
Complete documentation for tax and labour authority inspections
Support from our compliance experts for complex cases
A1 certificates and posted worker notifications from a single provider

Whether you occasionally send an employee on workation or coordinate hundreds of business trips each year, Vamoz keeps each individual case assessed and traceable.

Conclusion

Can a business trip or workation create a permanent establishment? The honest answer is: it depends. The OECD guidance provides useful orientation through the 50% threshold and the commercial reason test. However, it does not replace the relevant treaty or local tax authority practice, nor does it protect against dependent agent permanent establishment risks.

You do not need to prohibit flexible work abroad. You should manage it with clear rules, proper documentation and individual assessments that go beyond a gut feeling.

Ready to manage business trips and workations securely? Book a demo to learn how Vamoz helps protect your company against unintended permanent establishments.

This article provides general information and does not replace tax advice for an individual case.

Can a Business Trip or Workation Create a Permanent Establishment Abroad?