International tax developments October 11, 2026
What changed this week
| Development | Who it affects |
|---|---|
| OECD updates the Model Tax Convention with a remote-work permanent establishment framework | Any employer with cross-border employees working from a home office in another country, including Korean, European, or Latin American subsidiaries of US groups and vice versa. |
| France files the 2027 draft finance bill (PLF 2027) | US groups with a French subsidiary or French permanent establishment, especially those near the corporate surtax threshold or active in shipping, transport infrastructure, or green industrial investment. |
| South Africa opens consultation on a digital VAT model (e-invoicing, interoperability, e-reporting) | Any business registered for VAT in South Africa, including US groups selling into or operating through South African entities and their invoicing-software or ERP providers. |
| Singapore extends the Enterprise Innovation Scheme to AI adoption for YA 2027 and 2028 | Singapore-tax-resident companies considering AI adoption spend in YA 2027 or YA 2028, including Singapore subsidiaries of US groups and partners of Singapore-based operating companies. |
OECD updates the Model Tax Convention with a remote-work permanent establishment framework
The OECD released its 2025 Update to the Model Tax Convention and Commentary, approved by the OECD Council on November 18, 2025 and incorporated into the revised full and condensed editions published in 2026. Although the text of Article 5 is unchanged, the commentary on the fixed place of business concept has been reorganized and expanded, replacing paragraphs 18 and 19 with a new paragraphs 44.1 through 44.21 framework that walks through how cross-border remote work from a home office may or may not create a permanent establishment on a case-by-case basis. The update also adds a new paragraph 6 to Article 25 on the interaction with the General Agreement on Trade in Services and includes other changes previously agreed by the OECD.
Who it affects: Any employer with cross-border employees working from a home office in another country, including Korean, European, or Latin American subsidiaries of US groups and vice versa.
What to do
Have HR, mobility, and tax jointly re-check which countries your remote staff work from, how long they stay, and whether their activities for the business go beyond the ancillary tasks the commentary describes.
Primary source: The 2025 Update to the OECD Model Tax Convention
France files the 2027 draft finance bill (PLF 2027)
The French government filed the Projet de loi de finances pour 2027 at the National Assembly on October 1, 2026. Tax-side measures described in the government’s own PLF 2027 documentation include an extension of the exceptional temporary surtax on corporate income tax, an extension of the exceptional temporary tax on large shipping companies, an increase in the tax rate on the exploitation of long-distance transport infrastructures, an expansion of the tax credit for investment in green industries, and the introduction of an exceptional accelerated depreciation regime. The overall budget targets a public deficit of 5.0% of GDP for 2027.
Who it affects: US groups with a French subsidiary or French permanent establishment, especially those near the corporate surtax threshold or active in shipping, transport infrastructure, or green industrial investment.
What to do
Have your French advisor map which proposed measures touch your 2027 effective tax rate and your capex plans before the Assembly starts examining the bill.
Primary source: French Government PLF 2027 (Projet de loi de finances pour 2027)
South Africa opens consultation on a digital VAT model (e-invoicing, interoperability, e-reporting)
The South African Revenue Service (SARS) published a VAT modernisation consultation paper in August 2026 that proposes a digital VAT model built on three pillars: e-invoicing, an interoperability framework, and e-reporting, with the goal of near real-time flow of VAT transaction data. The paper is part of SARS Modernisation 3.0 and sets out the architecture and open design questions, including cost, readiness, governance, standards, and safeguards. Comments are due by October 16, 2026 per SARS and government news channels.
Who it affects: Any business registered for VAT in South Africa, including US groups selling into or operating through South African entities and their invoicing-software or ERP providers.
What to do
Have your South African finance lead and ERP vendor submit input by October 16, 2026 on the pieces that affect your invoicing stack and roll out window.
Primary source: SARS VAT Modernisation Consultation Paper, August 2026
Singapore extends the Enterprise Innovation Scheme to AI adoption for YA 2027 and 2028
Singapore’s Inland Revenue Authority of Singapore (IRAS) has updated the Enterprise Innovation Scheme (EIS) page to reflect the Budget 2026 enhancement that adds artificial intelligence adoption as a new qualifying activity for years of assessment 2027 and 2028. The EIS already offers enhanced deductions and allowances on qualifying R&D, IP registration, acquisition and licensing, training, and innovation projects with partner institutions, generally delivering up to 400% enhanced deductions or allowances on qualifying expenditure up to a cap. The cash conversion option does not apply to the new AI activity, and IRAS indicates that further details will be released as the guide is updated.
Who it affects: Singapore-tax-resident companies considering AI adoption spend in YA 2027 or YA 2028, including Singapore subsidiaries of US groups and partners of Singapore-based operating companies.
What to do
Have your Singapore finance team map planned AI adoption spend against the EIS qualifying definitions as IRAS releases more detail, and confirm whether cash conversion will be elected for any other EIS activity before the window closes.
Primary source: Enterprise Innovation Scheme (EIS), Inland Revenue Authority of Singapore
What this means for your business
- If your business has anyone working across a border from a home office, the OECD’s refreshed permanent establishment framework in paragraphs 44.1 to 44.21 is the new baseline your advisor should be using.
- If you have French operations, the PLF 2027 extends temporary corporate surtaxes and adds targeted green and depreciation incentives worth pricing into your 2027 plan.
- If you report VAT in South Africa, the October 16, 2026 comment deadline is your last chance to shape how fast e-invoicing and e-reporting arrive.
- If you file in Singapore, the EIS now rewards AI adoption spend as a qualifying activity for YA 2027 and YA 2028.
This week in international tax, in one line
The OECD put out a refreshed Model Tax Convention with a cross-border remote-work permanent establishment framework, France filed its 2027 draft finance bill with extended corporate surtaxes and green and depreciation incentives, South Africa opened VAT-modernisation consultation that closes October 16, and Singapore added AI adoption as a qualifying activity under its Enterprise Innovation Scheme.
Frequently asked questions
Q. Does working from home across the border now automatically create a permanent establishment under the OECD’s updated commentary?
No. Working from a home office does not automatically create a permanent establishment. The updated commentary on Article 5 of the OECD Model Tax Convention sets out a case-by-case fixed place of business test in new paragraphs 44.1 through 44.21, with factors such as the amount of working time spent there and whether there is a commercial reason for the home-office arrangement. Dependent agent rules are not changed.
Q. What should a US group with a French subsidiary read first in the PLF 2027?
Start with the proposed extension of the exceptional temporary surtax on corporate income tax (and the related large-shipping surtax if applicable), the increase in the tax rate on exploitation of long-distance transport infrastructures, the expanded tax credit for investment in green industries, and the exceptional accelerated depreciation regime. The French government’s PLF 2027 documentation describes these items and the broader deficit targets.
Q. What is the deadline to comment on the SARS VAT modernisation consultation paper?
Comments are due by October 16, 2026, as described in SARS and South African government news channels. The paper covers e-invoicing, an interoperability framework, and e-reporting, with the goal of near real-time flow of VAT transaction data under SARS Modernisation 3.0.
Q. What qualifies for the new AI activity under Singapore’s Enterprise Innovation Scheme?
IRAS has added artificial intelligence adoption as a new qualifying activity under the Enterprise Innovation Scheme for YA 2027 and YA 2028. The cash conversion option does not apply to the new activity, and IRAS indicates that further details will be released as its guide is updated, so monitor the EIS page for the definition of AI adoption expenditure before you commit spend.
