Taxation of business profits limits taxation to residence unless a permanent establishment yields attributable profits.

Taxation of business profits is limited to the enterprise's residence unless it operates in the other Contracting State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed by the other State. Such profits are determined by treating the permanent establishment as a distinct and separate enterprise under similar conditions and dealing independently. Deductions for expenses incurred for the permanent establishment are allowed, but payments to the head office (other than reimbursement of actual expenses) by way of royalties, fees, commissions, management charges or, except for banks, interest are not deductible or taken into account. Purchases alone do not give rise to attributed profits, and the method of attribution must be applied consistently year to year.

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