Permanent establishment taxation: profits attributable to a PE may be taxed where business is carried on through it, subject to attribution rules. Profits are taxable only in the resident State unless business is carried on in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution must mirror the profits a distinct and separate enterprise would earn under similar conditions; deductible expenses incurred for the permanent establishment are permitted, but non-reimbursed charges between the establishment and head office (royalties, fees, commissions, management charges, and, except for banks, interest) are neither deductible nor treated as attributable income. Apportionment custom may be used if consistent with these principles; purchases alone do not generate attributed profits, and methods should be consistent year to year.