The way people work has changed permanently. Employees work across borders, digital nomads set up in co-working spaces from Queenstown to Singapore, and employers are often the last to realise that their flexible working policies may be quietly creating tax obligations in countries they have never traded in.
The "permanent establishment" concept (broadly, the threshold at which a business becomes taxable in a foreign country), long a cornerstone of international tax law, has never been under more scrutiny.
Revenue authorities are increasingly active
Tax agencies around the world have become significantly more active in examining whether businesses have created a taxable presence in their jurisdiction. Cross-border remote working arrangements, international secondments, and employees who simply happen to be in another country for long enough have all attracted the attention of revenue authorities.
Businesses that once had no reason to think about permanent establishments are finding that the rules apply to them.
Some changes have been made, but they only go so far
Regulatory changes have offered businesses some relief. The OECD updated its guidance in November 2025 to clarify when an employee working from home in another country might create a permanent establishment for their employer. Amendments to New Zealand's tax legislation, enacted in March 2026, introduced a new "non-resident visitor" concept that provides some comfort for employers where overseas employees carry on working while visiting New Zealand.
These are useful developments, but it is worth being clear about what they do and do not address. Both measures focus on the position of the individual and when an employee's presence creates or does not create a problem for their employer. Neither changes the fundamental rules about when a business itself has a taxable presence in another country through its own activities, arrangements, or commercial relationships. The core permanent establishment question remains very much alive, and revenue authorities remain focused on it.
What this means for your business
For any business with a cross-border dimension, whether that is a New Zealand business with staff or operations overseas or an overseas business with people working in New Zealand, the question of taxable presence is worth considering. The answer is not always straightforward, and revenue authorities are not stepping back from this area any time soon.
If you would like to discuss how the permanent establishment rules might apply to your business or your people, please get in touch with our tax team to talk it through.
