Business profits taxable in source only when attributable to a permanent establishment; attribution follows arm's length principles. Profits of an enterprise are taxable only in the State of residence unless business is carried on in the other State through a permanent establishment; only profits attributable to that establishment may be taxed there. Attributed profits should reflect what the establishment would earn as a distinct and separate enterprise under similar conditions, allowing deductions for expenses incurred for the establishment subject to local tax law, while excluding non reimbursed head office charges such as royalties, management fees, commissions and, except for banks, interest.
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.
Business profits taxable in source only when attributable to a permanent establishment; attribution follows arm's length principles.
Profits of an enterprise are taxable only in the State of residence unless business is carried on in the other State through a permanent establishment; only profits attributable to that establishment may be taxed there. Attributed profits should reflect what the establishment would earn as a distinct and separate enterprise under similar conditions, allowing deductions for expenses incurred for the establishment subject to local tax law, while excluding non reimbursed head office charges such as royalties, management fees, commissions and, except for banks, interest.
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