Permanent establishment principle: only profits attributable to the establishment may be taxed in the other State under allocation rules.

An enterprise is taxable only in its State of residence unless it carries on business in the other State through a permanent establishment, in which case only profits directly or indirectly attributable to that permanent establishment may be taxed there. Attribution follows the separate-enterprise principle, allows deduction of expenses incurred for the permanent establishment (including executive and general administrative expenses) subject to domestic limitations, excludes non-reimbursed payments between head office and permanent establishment (such as royalties, commissions, management charges and, except for banks, interest), precludes attribution merely for purchases of goods, and preserves special rules for items addressed elsewhere in the Convention.

---

---

---