Business profits attribution: permanent establishments may be taxed on profits attributable under arm's length methods and deductions.

Profits of an enterprise are taxable only in its State of residence unless it carries on business in the other Contracting State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution is on a distinct-and-separate enterprise basis, applied consistently year by year unless there is good reason to change. Deductible expenses incurred for the permanent establishment's business are allowed under the law of the State where the permanent establishment is situated, and no profits are attributed merely for purchases; where precise determination is impracticable, domestic law may be applied consistent with these principles.

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