Business profits taxation: profits taxed at residence unless attributable to a permanent establishment, then only attributable profits taxed.

Article 7 limits taxation of an enterprise's business profits to its State of residence except insofar as a permanent establishment in the other State earns attributable profits. Profits attributable to a PE are computed on the separate enterprise, arm's length basis. Deductions for expenses incurred for the PE are allowed within the taxing State's law, but amounts (other than reimbursements) charged between PE and head office for royalties, fees, commissions, management charges and, except for banks, interest are disallowed. No profit is attributed merely for purchase activities; attribution methods should be applied consistently year to year, and other Articles govern income treated separately.

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