Business profits allocation: taxable in residence unless attributable to a permanent establishment, using arm's length attribution. Article 7 allocates taxing rights on business profits to the State of residence unless an enterprise operates through a permanent establishment in the other State; profits taxable there are only those attributable to the permanent establishment. Attribution follows the arm's-length principle treating the permanent establishment as a distinct enterprise. Deductions for expenses incurred for the permanent establishment are allowed only to the extent permitted by the domestic law of the taxing State, while interoffice payments such as royalties, management fees and, except for banking, interest are generally excluded from deduction and from amounts charged in profit attribution. Customary apportionment methods may be applied, and attribution methods should be applied consistently year to year.
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Provisions expressly mentioned in the judgment/order text.
Business profits allocation: taxable in residence unless attributable to a permanent establishment, using arm's length attribution.
Article 7 allocates taxing rights on business profits to the State of residence unless an enterprise operates through a permanent establishment in the other State; profits taxable there are only those attributable to the permanent establishment. Attribution follows the arm's-length principle treating the permanent establishment as a distinct enterprise. Deductions for expenses incurred for the permanent establishment are allowed only to the extent permitted by the domestic law of the taxing State, while interoffice payments such as royalties, management fees and, except for banking, interest are generally excluded from deduction and from amounts charged in profit attribution. Customary apportionment methods may be applied, and attribution methods should be applied consistently year to year.
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