Business profits taxation limited to residence unless permanent establishment creates attributable profits taxable abroad.

Article 7 limits taxation of business profits to the enterprise's State of residence unless the enterprise carries on business in the other State through a permanent establishment; in that case only profits attributable to the permanent establishment may be taxed. Attribution treats the permanent establishment as a distinct and separate enterprise dealing independently under similar conditions. Deductible expenses include those incurred for the permanent establishment, including executive and administrative expenses incurred in or outside the State. Purchases of goods do not by themselves create attributed profits. The method of attribution should be applied consistently year to year, and income covered by other Articles remains governed by those Articles.

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