--- title: Manage remote work from abroad – prevent the emergence of a permanent place of business with these tips! date: 2026-03-27T05:49:15Z modified: 2026-07-26T10:37:58Z permalink: "https://grow.ee/juhi-kaugtood-valismaalt/" type: post status: publish excerpt: Managing remote work from abroad is not just a convenience – read how to manage wisely and avoid tax risks. wpid: 15304 featured_image: "https://grow.ee/wp-content/uploads/2026/03/Kaugtoona-juhtimine.png" timestamp: 2026-07-26T10:37:58Z tags: - Accounting --- ![](https://grow.ee/wp-content/uploads/2026/03/Kaugtoona-juhtimine-1.png) The risk of a permanent establishment (PE) is one of the main issues that Estonian companies and board members face when a managing person operates from a foreign country for an extended period. The emergence of a PE means that a foreign country may have the right to tax part of the company's profits. This in turn leads to local registration, tax obligations and the risk of possible double taxation. Below we explain how a board member can work from a foreign country so that the company does not have a permanent establishment in that other country, and what practical measures are recommended to be implemented. ### What is a permanent establishment and why does a board member working abroad pose a PT risk? A permanent establishment is an economic entity through which a company conducts regular business activities in another country. This can be expressed, for example, in the form of an office, a management center or a regular workplace of a board member. The treatment of a non-resident's permanent establishment in Estonian legislation also emphasizes that the substantive conduct of economic activities is decisive, not just geographical space or occasional activity. **The OECD 2025 updated guidelines on teleworking and permanent establishment explain that:** - a permanent establishment may also arise from the home office of a board member if it is used for the company's main business activities and is at the disposal of the company; - however, a home office is not considered to be at the disposal of the company if the board member works from there only for his or her own convenience and does not perform strategic business tasks there. - A board member is the highest decision-maker in the company. If he works in a foreign country for a longer period and makes important management decisions there, this may, in the opinion of the foreign country, provide grounds to consider the company's profit as having arisen in that country. **According to the OECD 2025 Guidelines, PT may arise if:** - a board member spends more than 50% of his working time in another country and - his activities are commercially important, e.g. making strategic decisions, concluding contracts or actually agreeing on them. The risk of PT is also higher if the board member is the sole or main decision-maker of the company (founder CEO type role). ## How to assess the risk of the creation of a permanent establishment? Three main tests according to the OECD Guidelines - The updated OECD 2025 Guidelines provide a three-stage test for assessing working from abroad: - Permanence test - does the board member work in another country regularly and for an extended period of time? - 50% working time test - is more than half of the working time spent in the foreign country? Business justification test - is working abroad commercially necessary or is it done for the employee's own convenience? If the work is done at the employee's convenience and the company does not require them to work there, the risk of PT is significantly lower. In addition, the OECD 2026 analysis confirms that even if a board member works from abroad for more than 50% of the time, PT does not automatically arise - the commercial nature of the activity and whether the company has control over this workplace are also assessed. ## How to avoid the emergence of a permanent establishment? Practical methods and tips: #### 1. **Document that remote work from abroad is done at the request of the board member, not at the company's need** According to OECD guidelines, a key factor reducing the risk of PT is clear documentation that the remote or home office is used for the employee's convenience, not at the employer's request. For example: - state in the board member's contract that working from abroad is done at his or her own initiative; - the company should have demonstrably offered work in Estonia or provided Estonian office space. This approach has been recognized by the OECD as an important distinguishing factor in excluding PT. #### 2. **Avoid making important business decisions abroad** A high PT risk arises if a board member: - enters into contracts abroad, - negotiates and agrees on the important terms of transactions, - is responsible for the main functions of the company while abroad. This corresponds to the PT characteristics of a dependent representative, which apply to both the OECD Model Tax Convention and Estonian tax treaties. ![Electric Light Bulb](https://statics.teams.cdn.office.net/evergreen-assets/personal-expressions/v2/assets/emoticons/1f4a1_electriclightbulb/default/50_f.png?v=v9) **Tip**: important board decisions are made on Estonian soil or digitally through an Estonian location (in the meeting minutes, indicate Estonia as the place of decision-making). #### 3. **Make sure that the company does not have a permanent work environment in the foreign country** The formation of a permanent establishment requires that: - the work environment is at the disposal of the company and - it is related to the company's business activities. If the home office of a board member is not at the disposal or under the control of the company (the company does not rent it or give instructions for its use), the risk of PT is lower. According to OECD guidelines, a home office is not considered to be at the disposal of the company if the employee chooses it voluntarily and does not perform tasks there that are decisive for the management of the company. #### 4. **Avoid hiring employees in a foreign country or providing services there through a board member** If a board member: - manages employees in another country, - designs the company's structure there, - hires local staff or - creates a customer base in that foreign country, then an economic entity that meets the characteristics of PT (permanent staff, place of earning income) may arise in the foreign country. #### 5. **Check tax treaties and country-specific differences** Estonian tax treaties mostly follow the OECD model, but PT criteria and exceptions may vary from country to country. Tax treaties directly affect how a foreign country assesses the home office PT risk, the conditions of a dependent agent PT, and the limitations related to the duration of construction and project work (e.g. 6 or 12 months). It is worth regularly checking the list of tax treaties on the websites of the Estonian Tax and Customs Administration and the Ministry of Finance and, if necessary, reading the comments of a specific country on the definition of PT. #### 6. **Create an internal teleworking policy to mitigate PT risk** According to the OECD 2026 recommendations, companies should create clear internal rules that: - require the board member to assess the PT risk before moving abroad, - restrict the performance of commercially significant activities from abroad, - regulate the extent to which the board member is authorized to perform contractual activities in a foreign country. ## Summary A board member can work safely from abroad if the risks are consciously managed. The creation of a permanent establishment is not automatic, but the role of a board member increases the PT risk compared to regular employees. However, the OECD 2025 and 2026 guidelines provide clarity: PT risk is avoidable if the company documents the organization of its activities correctly, limits commercially significant activities in a foreign country and ensures that the work place in a foreign country is not at the disposal of the company or commercially unavoidable. 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