The OECD has approved the 2025 Update to the OECD Model Tax Convention, introducing necessary clarifications for digital nomads, remote-first teams, globally mobile professionals, and foreign companies with staff working from Portugal and Madeira. These updates reshape tax-risk analysis in two significant areas: home-office permanent establishment (PE) and cross-border exchange of information.
At MCS, we support individuals and companies relocating to Madeira, and these changes have a direct impact on our clients.
1. Remote Work and Digital Nomads: Updated OECD Rules on Home-Office Permanent Establishment
The 2025 Update significantly expands the Commentary to Article 5, clarifying when a home office may become a “fixed place of business” of a foreign enterprise. This is central for digital nomads working from Madeira and companies sending staff abroad.
What the OECD Clarifies
The new Commentary confirms that:
- Remote work does not automatically create a Permanent Establishment.
- A home office becomes a PE when the enterprise requires the individual to work from that location.
- A PE may arise when the home office becomes an available and continuous business location of the enterprise.
- Voluntary home-office arrangements do not create a PE unless strategic or core business functions occur there.
Implications for Digital Nomads in Portugal and Madeira
Many remote workers choose Madeira for lifestyle reasons. Under the OECD’s updated analysis:
- Voluntary remote work usually does not create a corporate tax nexus in Portugal.
- A foreign company may face Portuguese PE exposure when essential management, decision-making, or core operations occur from the individual’s home.
- Founders, executives, and platform workers performing high-value functions face elevated PE risk.
How MCS Helps Clients Manage This Risk
We strongly recommend:
- Documenting that remote work in Madeira is voluntary, not employer-mandated.
- Using employment or services agreements that confirm the worker chooses their location.
- Avoiding company-provided infrastructure that implies corporate control over the home office.
- Ensuring strategic decisions remain outside Portugal when remote staff work from Madeira.
These measures help prevent unintended corporate tax obligations for foreign companies.
2. Enhanced Tax Transparency: OECD Expands Exchange-of-Information Rules (Article 26)
The 2025 Update updates Article 26
Exchange of Information, and these changes directly affect individuals with international income, foreign companies with remote workers, and investors using multi-jurisdictional structures.
Two Key Clarifications Now Apply Globally
Exchanged information may be used for tax matters involving other individuals.
As such, the OECD now expressly confirms that:
- Information received about one person may be used to assess the tax position of another person.
- This applies under tax treaties, CRS, FATCA, DAC frameworks, and soon CARF 2027 for crypto-asset reporting.
- Tax authorities may link cross-border data even when the taxpayer was not the subject of the original request.
Practical effect: Family structures, offshore companies, wealth-holding entities and crypto users will face broader visibility across tax authorities.
Clear rules on taxpayer access to exchanged information
The new guidance clarifies:
- When a taxpayer may access information exchanged about them.
- When access may be restricted to protect cooperation between tax authorities.
- How “reflective” information, data generated from the analysis of exchanged information, may be disclosed.
Result: Tax transparency increases, but access rights depend on the confidentiality safeguards outlined in the treaty.
3. What This Means for Individuals and Companies Moving to Madeira
A. Digital nomads must structure remote work deliberately
The OECD now places greater emphasis on the nature of the working arrangement. If the move to Madeira is voluntary, PE risk stays low. If the home office becomes a functional business hub, the foreign company may be subject to Portuguese tax obligations.
B. exchange of information is now broader and deeper
Authorities can use data more widely, even when it relates only indirectly to the taxpayer. This reinforces the importance of accurate residency classification, complete reporting, and precise documentation.
C. MCS ensures compliance and protects clients
We assist with:
- Tax residency advice for digital nomads
- Corporate PE analysis for remote-first structures
- Structuring foreign companies operating from Madeira
- Tax planning for international entrepreneurs and remote workers
Key Takeaway
The 2025 OECD Model Update provides new clarity on home-office PE and a more comprehensive framework for tax transparency. Digital nomads and remote professionals relocating to Portugal must understand how these rules apply. Foreign companies with staff in Madeira must ensure their structures remain compliant.
MCS is ready to support remote workers, founders, investors and international businesses navigating this updated global tax framework.
This publication is provided by Madeira Corporate Services (MCS) for general information purposes only. The content does not constitute legal, tax, accounting, or financial advice, nor should it be relied upon as a substitute for formal professional guidance. Although every effort has been made to ensure the accuracy of the information at the time of writing, laws, regulations, administrative practices, and international tax standards are subject to change without notice, including developments arising from the OECD Model Tax Convention, EU directives, Portuguese legislation, and bilateral tax treaties.
MCS makes no representations or warranties, express or implied, regarding the completeness, accuracy, reliability, or suitability of the information contained herein. Any reliance placed on this material is strictly at the user’s own risk. Readers should obtain specific advice tailored to their personal or corporate circumstances before acting on any information contained in this publication.
MCS does not accept any liability for any direct or indirect loss, damage, or expense arising from the use of, or reliance on, this publication or any information herein. Readers are responsible for ensuring compliance with all applicable laws and regulations.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
