PE domestic law

Finland amends domestic law to align PE income attribution with Authorized OECD Approach

On 28 April 2026, Finland published in the Statute Book of Finland amendments to the Income Tax Act, the Business Income Tax Act and the Act on the Elimination of International Double Taxation, introducing more detailed rules for the attribution of income to permanent establishments (PE) in line with the Authorized Organisation for Economic Co-operation and Development (OECD) Approach (AOA).

Under the AOA, income attributable to a PE is determined as if the PE were a separate and independent enterprise carrying on the same or similar activities under the same or similar conditions. The amendments introduce more detailed domestic rules for determining income attributable to a PE and expressly address the treatment of internal dealings between different parts of the same enterprise.

Changes to the Business Income Tax Act allow internal dealings between a PE and other parts of the enterprise to be taken into account in determining taxable business income. Corresponding amendments to Finland's double tax relief rules also allow these dealings to be considered when determining foreign tax credits in respect of income attributable to a foreign PE.

The amendments are scheduled to enter into force on 1 January 2027.

Other PE developments

Sweden revises PE guidance for remote-work arrangements

On 17 March 2026, the Swedish Tax Agency published new guidance on when an employee's work from home or another nonbusiness location may give rise to a PE for a foreign company in Sweden.

The new guidance replaces the Swedish Tax Agency's previous position paper, which has ceased to apply. In its updated guidance, the Swedish Tax Agency refers to the OECD's 2025 update to the Commentary on Article 5 of the OECD Model Tax Convention (OECD MTC), noting that the definition of PE in the Swedish Income Tax Act is aligned with the OECD MTC and has been interpreted in Swedish caselaw by reference to OECD Commentary. Withdrawal of the prior position paper follows the OECD's clarification of how existing PE principles apply to modern remote work arrangements and reflects a more structured framework for assessing whether a home office or similar location may be considered to be at the disposal of the enterprise for Swedish PE purposes.

The updated guidance reflects the OECD's revised approach to cross-border remote working. As a starting point, work carried out from a private residence, holiday home or other nonbusiness location would normally not give rise to a PE if the individual spends less than 50% of their total working time at that location over any 12-month period.

If that level of presence is reached or exceeded, a PE is not automatically established. Rather, the situation calls for a closer, fact-specific analysis. In practice, this involves considering whether there are genuine commercial reasons for the activities to be carried out in Sweden, for example if the role involves customer interaction, market-facing functions or access to local resources. The nature of the activities, their connection to the business of the foreign enterprise, and the extent, regularity and permanence of the individual's presence must be taken into account. Ultimately, the question is whether the location can, in substance, be regarded as being at the disposal of the enterprise and used as a place of business in Sweden.