Business profits attribution to a permanent establishment governs cross-border taxation and limits head-office deduction claims. Profits are taxable in the State of residence unless a permanent establishment exists in the other State, in which case only profits attributable to that permanent establishment, related sales, or similar activities may be taxed there. Attribution follows the separate enterprise principle. Deductions are allowed for expenses incurred for the permanent establishment, subject to local tax law, but not for amounts (other than reimbursements of actual expenses) charged between the permanent establishment and head office for royalties, management charges, commissions or, except for banks, interest. No profits arise from mere purchases, and the attribution method should be applied year by 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.
Business profits attribution to a permanent establishment governs cross-border taxation and limits head-office deduction claims.
Profits are taxable in the State of residence unless a permanent establishment exists in the other State, in which case only profits attributable to that permanent establishment, related sales, or similar activities may be taxed there. Attribution follows the separate enterprise principle. Deductions are allowed for expenses incurred for the permanent establishment, subject to local tax law, but not for amounts (other than reimbursements of actual expenses) charged between the permanent establishment and head office for royalties, management charges, commissions or, except for banks, interest. No profits arise from mere purchases, and the attribution method should be applied year by year.
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