A glance at multinational company structures: updates to the permanent establishment (PE) definition

On 11 March 2025, the Austrian Federal Ministry of Finance (BMF) has published the amendment decree 2025 on the Transfer Pricing Guidelines 2021 (TPG 2021). The amendment decree includes significant updates and clarifications regarding the permanent establishment pursuant to tax treaty law.

Update of the home office PE concept

The concept of home office qualifying as a PE is now clearer, since it is continued in the latest letter ruling EAS (Express Answer Service) 3445. Thus, the TPG clarify that cross-border working in home office in the employee’s state of residence does not qualify as a PE of the employer if not required by the employer. The TPG deny a home office PE, if the employee performs his duties also at the workplace provided by the employer, such as the head office at the company’s headquarters.

Simplification of sales structures by clarification of the dependent agent PE

The decree provides clarity for companies that occasionally rely on agents abroad, clarifying that occasional contract conclusions or temporary agency services do not qualify for PE creation.

Exemptions for preparatory and ancillary activities

The interpretation of the PE definition was completed since the TPG 2021 now include a summary of the administrative practice regarding the exemption of preparatory and ancillary activities. In order for the exemption to apply, it is significant that the preparatory or ancillary activities are provided only for the company, not for other group companies or third-party companies.

Implications in practice:

• The update of the home office PE concept pursuant to the latest EAS, provides major benefits from a practice point of view, since the principle of good faith applies to the guidelines, as opposed to the EAS.
• The current interpretation of the home office PE and dependent agent PE represents a significant relief for the practice. The clarification for agency services reduced the administrative burden and supports flexibility of cross-border business activities. Numerous constellations are now easier to manage in the practice.
• However, no conclusive statements are included for various use cases, such as executive employees, managers and agents working from home – in practice, these use cases are still to be analysed and assessed on an individual case basis.
• The updates to the PE definition offer new opportunities for new work and simplify strategic planning for companies seeking to succeed on the global labour market. Companies are advised to thoroughly examine tax effects and implement appropriate monitoring and documentation processes prior to granting (additional) home office options to their current or future employees. Contractual regulations on home office, for example directly in the employment contract or in home office guidelines, can serve as possible documentation. From the perspective of the employment contract, possible claims of the employees must also be taken into account.