In a recently published opinion (EAS) the Austrian tax administration has expressed and interpreted the concept of a home office permanent establishment (PE) in a much wider sense than previously assumed. Under certain conditions the home of an employee may be qualified as home office PE of a foreign entity. Due to the global Covid pandemic, work from home has become increasingly important. Since the concept of a home office PE, therefore, currently represents a hot topic we would like to give you some insights into this notion.

A home office PE is generally characterized by the fact that an employee’s home is permanently used for the performance of a business activity of the employer. In the case of merely irregular or occasional work from home, there is no PE due to the lack of sufficient power of disposal by the employer. In particular, those activities that have more than a subordinate function and for which the employer does not provide the employee with a workplace may qualify as a home office PE.

According to the above-mentioned opinion of the Austrian tax authorities, a home office activity will be qualified as PE if the following criteria are met:

• at least 50% of the working time is performed from home;
• the employer does not provide office space for the employee;
• the employee is obliged to work from home.

Additionally, the pro rata deduction of internet or telephone expenses in the employee's tax return represents evidence for the existence of a PE for tax purposes in Austria.

If the permanent home of an employee is qualified as PE, the foreign entity is subject to corporate income tax (CIT) in Austria, which is calculated on the income attributable to the PE. The amount of profits attributed to the PE are estimated on the basis of a function- and risk analysis.

In light of the above we would be happy to assist you in analysing the impact of these developments on your company!