Business profits: permanent establishment profits taxable where attributable under separate entity profit attribution and deduction limits.

Business profits are taxable only in the State of the enterprise 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 follow the separate and independent enterprise principle. Deductions are allowed for expenses incurred for the purposes of the permanent establishment, subject to the taxing State's law and limitations, but amounts passed between head office and permanent establishment (other than reimbursement of actual expenses) by way of royalties, fees, commissions, management charges or, except for banking enterprises, interest are not to be allowed as deductions or taken into account.

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