116

As the A/B treaty is identical to the 2017 OECD model treaty, and it was signed and entered into force in 2018, we must first consult paras 18 & 19 in the 2017 Comm.

Para 18: “Where … a home office is used on a continuous basis for carrying on business activities for an enterprise and it is clear from the facts and circumstances that the enterprise has required the individual to use that location to carry on the enterprise’s business (e.g. by not providing an office to an employee in circumstances where the nature of the employment clearly requires an office), the home office may be considered to be at the disposal of the enterprise.”

The question indicates that Mr B generally works from home “in order for his family to live in country B”. Also, the question indicates that Mr B has an office in ACo’s head office in country A, which he uses during the monthly visit. Presumably, the office (or, at least, an office) would be available to him at ACo’s head office if he were there at other times.

Thus, it appears that ACo has not required Mr B to work from home – which suggests there is no PE. However, earlier in para 18, there is this statement: “Whether or not a home office constitutes a location at the disposal of the enterprise will depend on the facts and circumstances of each case.” Does this statement allow an argument that the continued presence of the CEO (i.e., ACo’s most important employee) at the home office is sufficient to constitute a PE?

Does the 2025 Update provide clarity?

Mr B satisfies the “at least 50% of total working time” test (para. 44.10).

There is no “commercial reason” for Mr B to work from home.

Para. 44.19: “Where there is no commercial reason for undertaking the activities related to the business of the enterprise of a Contracting State from a home or other relevant place located in the other Contracting State, that place would not be a place of business of the enterprise unless other facts and circumstances indicated otherwise.”

Does the continued presence of the CEO (i.e., ACo’s most important employee) at the home office constitute sufficient other facts and circumstances to indicate otherwise?

Final answer: For both the 2017 Comm and the 2025 Update, Mr B appears not to satisfy the objective tests – which suggests that the home office would not constitute a PE. However, in both cases, there is a reference to “other facts and circumstances”, which might allow the country B tax authority to argue that the continued presence of ACo’s CEO is sufficient to cause there to be a PE.

What do you think?