KPMG warns remote work brings tax and compliance risks

Remote work is no longer a temporary accommodation. KPMG treats work from anywhere as a permanent shift in the talent market, and the firm’s message is blunt: flexibility can help attract and retain employees, but every location choice can carry tax, payroll, and legal consequences. For consultants, auditors, and mobility teams, the real issue is not whether a person can work from another place. It is whether the company can govern that choice without creating a compliance problem.

Remote work has a hidden back office

KPMG’s framing moves the debate away from employee preference and toward operating-model control. Distributed work can create cross-border tax issues, multi-state payroll compliance, and permanent-establishment risk, which means a routine request to work from another jurisdiction can affect where income is taxed, how wages are withheld, and whether the employer has created a taxable footprint. KPMG Canada’s practical guide pushes the point further by saying remote work can increase cost and complexity while also jeopardizing the integrity of corporate structures.

That is why this belongs in tax and mobility, not just HR. A manager who approves a work-from-anywhere arrangement without checking the downstream consequences may be creating exposure for payroll, entity structure, social security, and employment law all at once. In a professional-services firm like KPMG, that is exactly the kind of issue that crosses service lines, with tax, legal, mobility, and client-facing teams all touching the same employee decision.

Why the topic moved from exception to policy

KPMG has been talking about this shift for years. On June 11, 2020, the firm’s Tax Global Mobility Services group held a webcast called “Work Anywhere, Together” on the tax implications of global remote work. By 2021, KPMG was already warning that remote workforce arrangements required much greater attention to permanent-establishment issues, especially when employees worked across borders.

The language has only hardened since then. KPMG describes cross-border remote working as something that started as an extraordinary pilot and is now embedded in the operating model of many organizations. The OECD’s November 18, 2025 update to its Model Tax Convention commentary added another layer, with guidance on cross-border remote work and taxable presence. That matters because the tax question is no longer just internal policy design. It is also showing up in international guidance that employers need to follow.

What employers need to track before approving flexibility

A real work-from-anywhere policy is a control framework, not a handout. KPMG’s 2025 practical guide says employers need to manage tax, social security, and legal obligations, and the firm’s broader materials point to policy-based decision trees, approval workflows, tracking, and analytics instead of manual case-by-case decisions.

Before approving a remote-work request, employers need to know:

• where the employee will physically work
• how long the arrangement will last
• whether the move changes payroll withholding or registration obligations
• whether the employee’s presence could create permanent-establishment exposure
• whether social security rules change across borders
• whether local employment or immigration rules are triggered
• whether the arrangement fits the company’s corporate structure and risk tolerance

That checklist mindset is what turns a flexible-work request into a governed process. It also gives leaders a clean way to explain why some approvals are granted quickly while others require tax, legal, or mobility review. For KPMG teams advising clients, the value is in translating a personal request into a business-risk assessment that can be documented and defended.

The demand for remote work is still strong

This is not a niche compliance issue because remote work itself has not disappeared. Pew Research Center reported in March 2023 that 35% of workers in jobs that can be done remotely were working from home all the time. That was down from 43% in January 2022, but still far above the 7% level before the pandemic. The U.S. Bureau of Labor Statistics also said telework continued to grow at the start of 2024.

The BLS has also found a positive relationship between remote work and total factor productivity. That helps explain why employers keep pushing for flexibility even as the back-office risks get harder to manage. The business case for remote work has not vanished; it has simply become more conditional on disciplined governance.

What KPMG is seeing in practice

KPMG Canada points to a global investment firm that introduced location-flexible working to retain and support employees while also understanding the complexities that arise when people work outside their jurisdiction. That example shows the balance employers are trying to strike: flexibility can help keep talent, but only if the organization knows how to manage the tax and compliance fallout.

KPMG’s materials also point to use cases in financial services and higher education, which suggests the challenge is broad rather than industry-specific. The common thread is the same in each case: once a worker crosses a border, or even shifts states, the employer has to think about payroll, tax residence, legal obligations, and whether the company has created a presence it did not intend to create. For client teams, that means work-from-anywhere is best treated as an operating policy with clear approval rules, not as an informal benefit.

The bottom line for KPMG teams

The core lesson is simple: flexibility is a talent strategy, but it is also a tax-governance test. KPMG’s own framing makes clear that organizations need structures strong enough to handle multi-state and cross-border work without creating hidden liabilities or weakening corporate controls. For employees, that means remote-work freedom comes with boundaries. For advisors, it means the strongest answer is not yes or no, but a documented process that knows exactly which risks must be cleared before the laptop moves.