Business profits allocation: taxable in residence unless a permanent establishment yields attributable profits taxable in source state. Business profits are taxable only in the enterprise's resident State unless the enterprise carries on business through a permanent establishment in the other State, in which case only profits attributable to that permanent establishment may be taxed there. Profits attributable must be those the establishment would earn as a distinct and separate enterprise under similar conditions, allowing deductions for expenses incurred for the permanent establishment in accordance with the host State's tax laws. Customary apportionment or other prescribed methods may be used if they align with these principles; mere purchase of goods does not create attributed profits.
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.
Business profits allocation: taxable in residence unless a permanent establishment yields attributable profits taxable in source state.
Business profits are taxable only in the enterprise's resident State unless the enterprise carries on business through a permanent establishment in the other State, in which case only profits attributable to that permanent establishment may be taxed there. Profits attributable must be those the establishment would earn as a distinct and separate enterprise under similar conditions, allowing deductions for expenses incurred for the permanent establishment in accordance with the host State's tax laws. Customary apportionment or other prescribed methods may be used if they align with these principles; mere purchase of goods does not create attributed profits.
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