Permanent establishment attribution limits taxation to profits attributable to the PE under arm's length principles and allowed deductions. An enterprise is taxable in its State of residence except where it carries on business through a permanent establishment in the other State, in which case only profits directly or indirectly attributable to that permanent establishment may be taxed there. Attribution must follow the arm's length principle, treating the permanent establishment as a distinct and separate enterprise; deductible expenses incurred for the purposes of the permanent establishment are allowed. Customary apportionment methods remain permissible if consistent with the Article, purchases for the enterprise do not create attributable profits, and the chosen method should be used consistently year to year.
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.
Permanent establishment attribution limits taxation to profits attributable to the PE under arm's length principles and allowed deductions.
An enterprise is taxable in its State of residence except where it carries on business through a permanent establishment in the other State, in which case only profits directly or indirectly attributable to that permanent establishment may be taxed there. Attribution must follow the arm's length principle, treating the permanent establishment as a distinct and separate enterprise; deductible expenses incurred for the purposes of the permanent establishment are allowed. Customary apportionment methods remain permissible if consistent with the Article, purchases for the enterprise do not create attributable profits, and the chosen method should be used consistently year to year.
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