Why your British company doesn’t want you working from that Airbnb in Portugal – even for a week
You’ve booked a sunny week in the Algarve, laptop in tow, planning to squeeze in a few Zoom calls from your Airbnb balcony while topping up your tan. But if you’re employed by a UK company, your boss might hit the brakes faster than you can say ‘pastel de nata’.
According to tax and advisory firm RSM UK, what seems like a harmless ‘workation’ can open a Pandora’s box of complications for employers -from surprise tax bills to immigration headaches and even changes to social security rules.
Creating a permanent establishment
Chief among the concerns is creating a ‘permanent establishment’ (PE) in another country. If an employee is working remotely from abroad, even for a short stint, it could technically count as the company having a ‘fixed place of business’ overseas. That might trigger corporation tax liabilities in places like Portugal, along with extra reporting and compliance costs.
RSM notes that while the OECD issued updated guidance in late 2025 clarifying when remote setups do or don’t create a PE, plenty of grey areas remain.
For example, if someone works from home abroad for less than 50% of their time over a 12-month period, it’s generally not seen as a fixed place of business. But pop over the 50% mark, or if the setup looks like it’s serving the company’s core activities, and the risk shoots up.
Portugal is a popular spot for these requests, thanks to its digital nomad appeal and laid-back vibe. But without a local entity, UK firms could accidentally trigger tax residency issues or payroll obligations there. And if the employee hasn’t declared the arrangement properly, it might only come to light later, leading to awkward, time-consuming fixes.
No one-size-fits-all approach
“What might seem like a simple request, an employee working overseas for a couple of weeks, can unexpectedly create administrative hurdles,” the group said.
“These challenges can be particularly tough for smaller or fast-growing businesses. They may not have the inhouse expertise to navigate a patchwork of international rules, yet they often need access to global talent to keep pace with their ambitions.”
It adds that the same questions typically come up again and again:
- Is there any risk if a Director regularly works from a holiday home overseas for part of the year?
- Can someone tag a week of remote work onto the end of a holiday abroad?
- Can a new hire based overseas start immediately from their home country while waiting for visa approval?
- How long can an employee work abroad while caring for a relative without creating reporting obligations?
“Unfortunately, there’s rarely a one size fits all answer. Each situation depends on the rules of the specific country involved and the individual circumstances. This is why many employers feel cautious about agreeing to overseas working unless they fully understand the implications,” RSM said.
RSM suggests clearer internal policies to stop unreported overseas working, plus pushing for more consistent global guidance, perhaps a ‘safe harbour’ rule allowing a set number of days abroad without immediate obligations.
