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      At the Organisation for Economic Co-operation and Development (OECD) and United States Council for International Business (USCIB) International Tax Conference in late June 2026, officials from the U.S. Department of the Treasury and Argentina’s Ministry of Economy confirmed how they apply the updated OECD Commentary (the “Commentary”) on Article 5(1) of the OECD Model Tax Convention (the “Model”), issued in late 2025.1

      The Commentary provides a framework for when remote work arrangements, particularly home offices and other non‑enterprise premises, may constitute a “fixed place of business” permanent establishment (PE).

      Consistent with the OECD’s general approach to “clarifying” updates to its Model Commentaries, the officials clarified that, subject to reservations, observations, or differing treaty language, the Commentary applies to existing tax treaties in both the U.S. and Argentine treaty networks whose PE provisions are based on Article 5(1) of the Model. Accordingly, it may generally be used to determine whether a fixed place of business PE is created in the United States or Argentina by a foreign enterprise.

      WHY THIS MATTERS

      The United States and Argentina have now confirmed that they will use the OECD’s updated Commentary on Article 5(1) of the Model to assess whether remote work locations (e.g., home offices) create a fixed place of business PE under existing treaties based on that article (subject to reservations and treaty wording).

      If a remote work location in the United States or Argentina qualifies as a fixed place of business PE, the enterprise may face corporate income tax there on profits attributable to that PE, and this may also affect whether employee compensation is eligible for exemption from host country taxation under a tax treaty.

      This confirmation gives companies a clearer framework for when remote work may trigger a PE in the United States and Argentina and helps support more informed policy decisions, planning, cost forecasting, and risk management for employees working from non-company premises (home, second home, holiday rental, or similar). In light of this guidance, companies may want to review and, where necessary, refine their remote work and work-from-home policies and approval processes to manage PE exposure in both jurisdictions.

      Overview of the Commentary

      Article 5(1) of the Model defines a PE as a fixed place of business through which the business of an enterprise is wholly or partly carried on. The updated Commentary introduces a two-step framework for assessing whether a home office or other non-enterprise location is a “place of business” of the enterprise:

      • Time threshold (50%): If an employee works from home or at another non-company location for less than 50% of their total working time in a 12-month period, then that location is generally not treated as a place of business for the company.  

      • Commercial reasons: If the 50% threshold is exceeded, a PE is not automatically triggered. It depends on the facts and circumstances, with a key question being: are the activities at the remote work location being carried out in that country for a commercial reason?

      If there is no commercial reason to conduct the business from that home/remote location, it is generally not a place of business, unless other facts and circumstances indicate otherwise.

      It is important to note the following points:

      • Even if a location would otherwise be considered a fixed place of business, it will not constitute a PE if the activities performed there are of a preparatory or auxiliary character. These are typically supporting or ancillary activities that are not a core part of the enterprise’s business. The updated Commentary does not change this exception, which continues to apply to remote work scenarios where the nature of the activities meets the preparatory/auxiliary threshold.

      • The updates to the Commentary do not address PEs for dependent agents, which continue to be governed by the existing guidance.

      For prior coverage and more detail on the Commentary, including guidance on the types of activities that may constitute commercial reasons, please see the following:

      Context for Application to Existing Treaties

      A recurring issue with updates to the Commentary is whether they can be used when interpreting tax treaties that were signed before the latest changes.

      Under the general principles of the Model and its Commentary, updates that clarify how existing treaty provisions should be interpreted and applied are generally understood to be relevant when interpreting tax treaties already in force before the update, as long as:

      • the treaty wording is based on the relevant article of the Model; and

      • the countries involved have not entered reservations or made observations that point to a different interpretation.

      In a November 2025 blog on cross‑border remote working,2 the OECD secretariat underscored this approach by explaining that the new Article 5(1) guidance on remote work is intended to clarify how existing treaty language should be interpreted and can therefore be used in applying current treaties based on Article 5(1). The blog also notes that the 2025 update is meant to offer practical, immediately usable guidance for both taxpayers and tax authorities as they address increasingly common remote work patterns.

      Within this broader OECD framework, the comments by U.S. and Argentine officials at the OECD‑USCIB International Tax Conference indicate that both countries intend to follow this approach by using the updated Commentary to interpret and apply existing treaties based on Article 5(1), taking into account the specific treaty wording and any reservations or observations.

      KPMG INSIGHTS

      While it is welcome news that the United States and Argentina generally intend to apply the updated Commentary to existing treaties, important interpretive questions remain. These include how the 50% threshold should be measured in hybrid work arrangements and how to distinguish commercial activities from preparatory or auxiliary activities in the context of remote work.

      It is also critical to keep the limits of the framework in mind:

      • It applies only to “fixed place of business” PEs under Article 5(1). A non-U.S. company could still be treated as having a U.S. PE under the dependent agent PE provisions of an applicable income tax treaty based on the activities of an employee working remotely in the United States, even if the employee’s home office or other non-enterprise premises does not constitute a place of business of the enterprise under the Commentary framework.

      • Preparatory/auxiliary carve-out unchanged. The updated Commentary does not alter Article 5(4) of the Model. A location that would otherwise give rise to a PE under Article 5(1) is still not a PE if the activities carried on there are preparatory or auxiliary. 
                   
      • No PE does not mean no obligations. Even if a resident of a U.S. treaty partner does not have a U.S. PE as a result of the Commentary, the foreign company may  still have U.S. federal,  state, and local income tax  and social security withholding, reporting, and deposit obligations for employees working remotely in the United States, unless a specific  exception applies.

      Contacts

      John T. Seery
      John Seery

      Principal, Washington National Tax – Global Mobility Services

      KPMG in the U.S.

      Rob Fagan
      Rob Fagan

      Senior Manager, Washington National Tax – Global Mobility Services

      KPMG in the U.S.

      More Information

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      The above information is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

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