PE risk is often cited as a reason to limit workations from foreign offices, and while this risk may not be substantial, it does still exist (specially depending on the length of the stay, the role of employees and the destination country). Here’s why:

tax authorities may see this as an issue, depending on the local regulations and the specifics of the employee’s role, as the local office is a fixed place of business through which the business of an enterprise is wholly or partly carried on within affiliated companies. The existence of a local company does not eliminate the risk of creating another PE within it.

Aside from PE, the main risk is the applicability of local labor laws.

For example, if an employee from Germany is physically working in a Spanish office, local labor inspectors will ask what the business reason is for their presence in the office may interpret this either as not allowed being there (not an open cafe to pubnlic) as local employment rather than a temporary visit. This perceived “local employee” status can then trigger additional compliance checks and even lead to potential fines. Compare it to any other local friend visiting there

By taking the same scenario, if a German employee works from an office in Spain and is seen as performing work that could be deemed local, Spanish labor inspectors might consider that person an “employee” under Spanish labor law. This could lead to:

In the event of an audit or inspection, the employee could be required to comply with local employment conditions, minimum wage laws, and even social security contributions. This situation would apply whether or not the company had intended for them to work under Spanish labor conditions.

There’s also the risk that an employee might claim rights under local labor laws, creating additional obligations for the employer.

Given these risks, it’s understandable why WorkFlex tends to advise caution. Although PE risk may not be substantial, the complexities around local employment law can expose companies to audits and potential labor and tax penalties.. With the increasing attention on remote work compliance globally, these risks are becoming more noticeable in inspections.

In essence, while PE may not pose an enormous risk on its own, the intersection with local labor laws and potential inspection makes it risky to permit workations in office settings without proper precautions. By using WorkFlex and keeping employees informed about these potential compliance issues, you’re proactively avoiding unexpected complications.

If you decide to visit a company office during a workation, follow these steps to maintain compliance:

Co-working spaces have become a great thing within the past years.

Even if your trip is fully compliant, it could lead to correspondence with the local authorities as they are checking co-working spaces on a regular basis. If you still want to go to a co-working space, please make sure to select this option in the questionnaire for your place of work.

A hotel or an Airbnb are probably the safest and most undisturbed workplaces during your Workation. However, you should make sure that you have a stable internet connection and a good workspace (big enough desk or dining table; chair, and so on).

We've all seen the images of people with laptops in cafés - but be aware that this can only be a short-term solution. Cafés can be noisy, people may be able to see your screen and the internet may be unstable due to all the cell phones (and perhaps other people working).