Permanent establishment profits: taxation limited to attributable profits and attribution modeled on a separate enterprise.

Profits of an enterprise are taxable only in the State of residence unless carried on in the other Contracting State through a permanent establishment; then only profits attributable to that permanent establishment may be taxed there. Attribution requires treating the permanent establishment as a distinct and separate enterprise, allowing deductions for expenses incurred for its purposes subject to local tax law limits, but excluding non reimbursement charges between the establishment and head office (such as royalties, commissions, management fees and, except for banks, interest). Apportionment customs, purchase-only activity, year-by-year consistency, and treaty precedence for separately dealt incomes are also addressed.

---

---

---