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Permanent establishment profit attribution governs taxing rights and allowable deductions for cross border business profits. Article 7 assigns taxing rights to the State of the enterprise unless income arises through a permanent establishment in the other State, in which case only profits attributable to that permanent establishment may be taxed there. Attribution follows the separate and independent enterprise standard, with apportionment permitted where precise determination is impracticable. Deductions include expenses attributable to the permanent establishment, subject to local taxation law limits, but exclude non reimbursement payments between the permanent establishment and head office such as royalties, fees, commissions, management charges and, except for banks, interest. Purchases alone do not give rise to attributed profits; the chosen method must be applied 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 profit attribution governs taxing rights and allowable deductions for cross border business profits.
Article 7 assigns taxing rights to the State of the enterprise unless income arises through a permanent establishment in the other State, in which case only profits attributable to that permanent establishment may be taxed there. Attribution follows the separate and independent enterprise standard, with apportionment permitted where precise determination is impracticable. Deductions include expenses attributable to the permanent establishment, subject to local taxation law limits, but exclude non reimbursement payments between the permanent establishment and head office such as royalties, fees, commissions, management charges and, except for banks, interest. Purchases alone do not give rise to attributed profits; the chosen method must be applied consistently year to year.
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