Permanent establishment profits: taxable in host territory only to extent attributable to that establishment under attribution rules.

Taxation of business profits is limited to the enterprise's residence unless it carries on business in the other territory through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution assumes the permanent establishment is a distinct enterprise under similar conditions, and allowable deductions include expenses incurred for the permanent establishment subject to host law, while non reimbursement charges between head office and permanent establishment (royalties, fees, commissions, management charges, and, except for banks, interest) are disregarded.

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