Permanent establishment principle: taxable profits limited to those attributable to the permanent establishment where business is carried on. Profits are taxable in the residence State unless an enterprise operates in the other State through a permanent establishment, where only profits attributable to that permanent establishment may be taxed. Attribution treats the permanent establishment as a distinct enterprise under similar conditions; allowable deductions include expenses incurred for the permanent establishment but exclude non-reimbursed head office charges (royalties, management fees, commissions and, except for banks, interest). Apportionment customary in a State may be used if consistent with Article principles; purchases alone do not create attributed profits and the attribution method should remain consistent year to year.