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Abstract

Substance, understood as people performing functions that generate value for an enterprise, is a crucial concept under the current international tax regime. Nowadays, in several jurisdictions, the use of entities that lack personnel as a catalyser of cross-border tax planning structures is not possible due to the implementation of BEPS-related measures. However, BEPS did not entail the eradication of tax planning structures – instead, it made them more costly. Several of these strategies may still be implemented, but at the cost of allocating a greater level of capable personnel performing decision-making functions in low or no tax jurisdictions, i.e., by allotting substance therein. Nonetheless, one may question whether to relocate personnel is actually necessary, especially with the significant rise in remote work after the pandemic. Remote work could enhance the hiring of personnel located in jurisdictions where labour costs are lower, as well as savings due to the lack of need for premises. Henceforth, a relevant query arises: do international tax standards foresee the relevance of remote working in connection with substance requirements? This contribution undertakes an account of the treatment of substance within international tax standards, connected with the incidence of remote work in four areas: the attribution of profits to permanent establishments, transfer pricing, the PPT rule and the ATAD 3.