Permanent establishment profit attribution limits source-state taxation to profits attributable to the PE under separate-enterprise principles. Business profits are taxable only in the enterprise's State of residence unless the enterprise carries on business in the other Contracting State through a permanent establishment; then only profits attributable to that permanent establishment may be taxed there. Attribution is to be made on the basis that the permanent establishment is a distinct and separate enterprise under similar conditions. Deductions are allowed for expenses incurred for the purposes of the permanent establishment, including executive and general administrative expenses, subject to the taxing State's tax law. Purchases of goods by the permanent establishment do not generate attributable profits, and the chosen method of attribution should be applied consistently year to year.
Cases where this provision is explicitly mentioned in the judgment/order text; may not be exhaustive. To view the complete list of cases mentioning this section, Click here.
Provisions expressly mentioned in the judgment/order text.
Permanent establishment profit attribution limits source-state taxation to profits attributable to the PE under separate-enterprise principles.
Business profits are taxable only in the enterprise's State of residence unless the enterprise carries on business in the other Contracting State through a permanent establishment; then only profits attributable to that permanent establishment may be taxed there. Attribution is to be made on the basis that the permanent establishment is a distinct and separate enterprise under similar conditions. Deductions are allowed for expenses incurred for the purposes of the permanent establishment, including executive and general administrative expenses, subject to the taxing State's tax law. Purchases of goods by the permanent establishment do not generate attributable profits, and the chosen method of attribution should be applied consistently year to year.
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