Digital Nomadism and the Elephant in the Room: the Permanent Establishment
Tributação da Economia Digital (Coord. Juracy Soares e Pedro Marinho Falcão com o apoio da APIT), Forthcoming
12 Pages Posted: 6 Sep 2023
Date Written: August 19, 2023
The main objective of this article is to answer the question of under which circumstances a digital nomad can constitute a permanent establishment.
We start by analysing Article 5 of the OECD Model Convention, whose Commentaries address the possibility of the home office constituting a permanent establishment. In the Commentaries, we seek to ascertain whether it is possible to argue that a digital nomad as an employee can give rise to a fixed place of business when in the exercise of his activity, he uses an Airbnb space, a coworking space or a smartphone.
We will also examine what conditions tax administrations consider to be met for a digital nomad to constitute a permanent establishment. Although their decisions are all based on the comments to Article 5 of the CMOCDE, the conclusions they arrive at can be different, but, in any case, there is always a focus on the concept of "being at the disposal of the enterprise".
The main takeaway is that the risk of an enterprise being taxed by having a permanent establishment when hiring a digital nomad is real, but it varies according to the country. In order to provide more security and transparency, the dissemination of binding information and guidance by tax administrations will be a solution that will provide security and transparency to the growing of this trend.
Keywords: digital nomadism; permanent establishment; remote work
JEL Classification: K34
Suggested Citation: Suggested Citation