Permanent establishment attribution: profits taxable only to the extent attributable to that establishment under arm's length principles.

Profits of an enterprise are taxable only in the State of residence unless business is carried on in the other State through a permanent establishment, in which case only profits attributable to that establishment may be taxed; such profits are to be determined as if the establishment were a separate enterprise, allowing deductions for expenses incurred for the establishment subject to domestic law, while disallowing non reimbursement payments (royalties, fees, commissions, management charges, and generally interest except as specified) between the establishment and head office.

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