Business profits attributable to a permanent establishment determine where taxation may occur under the treaty rules.

Profits are taxable in the residence State unless an enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution follows the separate and independent enterprise principle, allowing deductions for expenses incurred for the permanent establishment and permitting customary apportionment methods if consistent with the Article. No profits are attributed merely for purchasing goods, and the attribution method should remain consistent year to year unless there is sufficient reason to change.

---

---

---