Permanent establishment attribution determines taxation of business profits, limited to profits attributable to that establishment.

Article 7 provides that business profits are taxable only in the enterprise's resident State unless the enterprise has a permanent establishment in the other Contracting State; only profits attributable to that permanent establishment may be taxed there. Profits are attributed by treating the permanent establishment as a distinct and separate enterprise under the arm's-length principle. Deductions for expenses incurred for the permanent establishment are allowed subject to domestic law, while non-reimbursed payments between the permanent establishment and head office (royalties, service or management charges, commissions and, except for banks, interest) are disallowed; customary apportionment and year-to-year consistency rules apply.

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