Permanent establishments triggered by a home office in Denmark

For PEs potentially created due to a home office, according to the OECD Commentary 2017, it was key to determine whether the home office is “at the disposal” of the foreign company. The OECD Commentary 2017 noted that the fact that a foreign company's business activities in a jurisdiction are conducted from an employee's home office does not necessarily mean that such home office is at the company's disposal. The critical criteria were in the OECD Commentary 2017:

1. The employee must engage in business activities from the home office on a regular basis.
2. It must be evident that the foreign company requires or has a commercial interest in the employee using that location.
3. The activities performed at the home office must not be purely auxiliary or preparatory.

Based on the OECD Commentary 2017, recent Danish administrative tax practice confirms that the assessment is highly fact specific, and recent Danish case law (e.g., SKM2024.432.SR) confirms that the combination of job function, company interest, and the nature and regularity of the work are decisive.

In recent years, Danish administrative tax practice has evolved its approach to the "at disposal" requirement, established by the OECD Commentary 2017, focusing on the employee's job function, the company's interest in being present in Denmark, and whether home office work is planned rather than random. Key additional points from Danish tax practice include:

• If the employee’s presence in Denmark is solely for personal reasons, and the company does not benefit commercially from the arrangement, a permanent establishment is generally not created, even if the employee holds a management position.
  
  
• If the company has a commercial interest in the employee working from Denmark (e.g., market development, sales, or management of Danish operations), or if the employee’s activities are core to the business, a PE is more likely to be found.
  
  
• The regularity and permanence of the work from Denmark are important. Sporadic or occasional work is less likely to create a PE than regular, planned, or long-term work.

The presence or absence of a foreign company’s commercial interest in Denmark is often a decisive factor in determining whether a home office constitutes a PE. In cases such as SKM2020.432.SR and SKM2021.213.SR, the Danish Tax Council concluded that a PE was not created because the employee worked from a home office in Denmark solely for private reasons, and the foreign company had no commercial interest or benefit from the arrangement. The employee’s presence in Denmark was not required by the company, and the work performed was not directed at the Danish market or core business activities. Conversely, in rulings such as SKM2023.423.SR, SKM2022.557.SR, and SKM2022.406.SR, the Tax Council found that a PE was established. In these cases, the foreign company’s commercial interest was deemed present solely as a result of the employee’s work from home, particularly where the employee had decisive influence on management decisions, or where the company benefited from the employee’s activities in Denmark. The work performed was regular, planned, and integral to the company’s core business or management.

In SKM2024.432.SR, the Danish Tax Council confirmed that a foreign company had a PE in Denmark solely due to employing an executive employee with decisive influence on management decisions working from a home office, even if the employee’s presence in Denmark was also important for personal reasons. The Council further clarified that it was not necessary for the company to have other activities in Denmark. The decisive factor was the company’s commercial interest in the employee’s presence and the employee’s significant management role. The ruling also noted that the fact that it was important for the employee personally to work from Denmark did not preclude the existence of a PE if the company also had an interest in the arrangement due to the employee’s role and influence. Consequently, employing an executive employee in Denmark, especially one with decisive influence on management decisions, may, by itself, entail the existence of a PE for a foreign company in Denmark, even if there are no other activities or offices in Denmark and even if the employee’s presence is also motivated by personal reasons.

On the other hand, in SKM2025.525.SR and SKM2025.133.SR, the Tax Council highlighted that a fixed place of business requires that the foreign enterprise has a place at its disposal in Denmark through which core business activities are carried on. The employee’s home office did not meet this threshold, as the company neither demanded that he work from Denmark nor assumed responsibility for the premises. On this basis, the Tax Council concluded that the employee’s partial presence in Denmark did not give rise to a PE in Denmark.

It is the existence of a formal, advance arrangement – rather than the proportion of time spent working from Denmark – that is decisive for the “planned” criterion in the tax administration’s assessment of a home office as a PE (see SKM2023.423.SR and SKM2024.432.SR). If the employment contract or a formal agreement specifies that the employee will work from Denmark, this strongly indicates that the work is planned and not random. Conversely, if the employee works from home in Denmark only when specifically authorized by the foreign employer, and there is no advance planning or contractual arrangement, the activities are considered random and sporadic (see SKM2022.406.SR).

These rulings, based on the OECD Commentary 2017, reinforce the need for foreign companies to accurately plan and document, with clear documentation and contractual clarity, home office arrangements in Denmark. Special attention should be given to:

• The employee’s job role (especially if they have significant influence on management or are involved in sales/market-facing activities).

• Whether the home office arrangement is formalized in the employment contract or agreed in advance.
  
  
• Whether the work from Denmark is intermittent and only occurs with ad hoc employer authorization, which supports a finding that the activities are not planned or controlled.
  

The 2025 Update to the OECD Model Tax Convention and the impact on the Danish PE Assessment

On 19 November 2025, the OECD released an update to the Model Tax Convention, clarifying when a home office or similar remote work location may create a PE for tax purposes.

Notably, the 2025 Update omits the “at disposal” requirement and recognizes the practical challenges in assessing PEs for home offices, since such spaces are typically private and under the individual’s control. Instead, the new guidance focuses on whether there is a commercial reason for the employee’s physical presence in the other country and whether the arrangement is regular and ongoing, rather than sporadic. The OECD also introduces a general guideline that working from a home office for less than 50% of total working time in a 12-month period typically does not create a PE, while emphasizing that each case must be assessed on its specific facts.

In contrast, Danish tax practice has traditionally been stricter, placing significant emphasis on the employee’s job role (particularly for management or market-facing positions) and on whether the home office arrangement is formalized in a contract or agreed in advance. Under Danish rules, a PE may still be found even if the employee spends less than 50% of their time in Denmark, provided the work is regular, planned, and delivers a commercial benefit to the company.

As Denmark typically aligns with OECD guidelines, the 2025 Update could prompt a shift toward a more flexible Danish approach, potentially softening the criteria related to the employee’s job role in PE assessments.