A New Scenario in International Tax Law: Two Proposals to Rethink the OECD Model in Response to the Generalization of Distance Work by Employees

Abstract

This article analyses the necessity to adapt the OECD Model Tax Convention (OECD Model) for remote work. It argues that a legally binding agreement must be reached on two fundamental aspects: tax liability criteria for remote workers’ earnings and conditions determining when an employee’s remote work creates a permanent establishment (PE) for the employer. The article investigates the current regulation of these issues in the OECD Model, identifies problem areas and proposes reforms. In particular, it suggests a reformulation of tax liability determination for income from remote-working employment based on a reconsideration of the “source state” concept. Additionally, the article proposes creating an ad hoc decision tree to provide a clear and efficient method for verifying the potential existence of a PE due to an employee’s remote work.