Due to the impact of the Covid-19 pandemic, governments imposed restrictions on individual travel. This resulted in many companies changing their work model to accommodate employees working from home.
The effect of this change was fewer employee relocations and employees being given an opportunity to choose their home base for work that could be performed remotely, notes legal firm, ENS Africa.
The continued imposition of these government restrictions resulted in revised guidelines being published by the OECD in January 2021. The guidelines contained an analysis of whether the conclusions reached in April 2020 would continue to apply for an extended period of time. The person should carry on the business of the enterprise through the fixed place of business. This implies that if a business is carried on separately by the person in circumstances where it is not linked to the fixed place of business, there will be no permanent establishment.
If, however, the individual continues to work from home after the government-imposed restrictions have ceased, the tests to establish whether a PE exists as a result of the employee’s home office is whether there is a certain degree of permanency and whether the premises are at the disposal of the enterprise to carry on its business activities. If both tests are met, then a fixed place of business PE risk arises.
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