How SMEs and Foreign Enterprises Face New Fiscal Impacts Working remotely from abroad doesn't automatically turn a worker's home into an office for their company. The new OECD Commentary on the Convention Against Double Taxation, now consolidated in its full version of the Convention, has introduced new rules that require significant fiscal presence to consider a residence as a company’s office. This means that if the employee works less than half-time in a country, their home won’t automatically become a company’s office address. The new rule primarily concerns small and medium-sized enterprises (SMEs) offering remote work outside the country and foreign companies with personnel in Italy.

For example, if an employee works from home abroad but does not exceed 50% of their working time there, their residence will not be considered as part of the company's office location. Additionally, if the relevant economic activity carried out from abroad is not deemed a 'stable organization' within the context of the OECD Council, the exemption of 183 days provided by Article 15 of the OECD Model will be lost.

PMIs and foreign enterprises approach these new rules with caution. Some have decided to further restrict their employment agreements to people living in another country, thereby eliminating any possibility of considering their own residences as business locations.

Other companies have turned to their tax consultants for alternative solutions that comply with the OECD's guidelines. On November 18, 2025, the OECD approved new paragraphs in the Commentary of Article 5 of the OECD Model, replacing old paragraphs 18 and 19. These new paragraphs introduced a new threshold: 50% of an employee’s work time over twelve months. If an employee works less than 50% of the time in any country, their residence will not automatically become the place where the company conducts business activities. This new rule has had immediate impact on managing economic activities abroad. The PMIs and foreign enterprises must be more precise when defining each employee's fiscal presence, avoiding potential contradictions with local tax laws.

Moreover, businesses should become more active in seeking alternative solutions to 'stable organization' needed for their premises to be considered as an office space by the company. However, even though PMIs and foreign enterprises are facing these changes with caution, evolution continues. Advisors and experts suggest continuing to closely monitor upcoming changes from the OECD Council and maintaining a proactive approach when dealing with new rules imposed by law. In conclusion, while PMIs and foreign enterprises prepare themselves to face these new rules, it is important to remember that managing cross-border employment contracts remains a delicate and ongoing task.

The PMIs and foreign enterprises will always be ready to respond to the various challenges that may emerge from this radical change in external economic activities legislation.