Permanent establishment: only profits attributable to the PE may be taxed in the source state, using arm's length attribution. Article 7 allocates taxing rights for business profits by reference to the existence of a permanent establishment; only profits attributable to that permanent establishment may be taxed by the State where it is situated. Profits are attributed as if the permanent establishment were a distinct and separate enterprise dealing independently, with allowable deductions for expenses incurred for the permanent establishment's business. Where application of the separate-enterprise standard is impossible or unreasonable, profits may be apportioned or estimated on a reasonable basis consistent with the Article; purchases of goods alone do not give rise to attributed profits.
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: only profits attributable to the PE may be taxed in the source state, using arm's length attribution.
Article 7 allocates taxing rights for business profits by reference to the existence of a permanent establishment; only profits attributable to that permanent establishment may be taxed by the State where it is situated. Profits are attributed as if the permanent establishment were a distinct and separate enterprise dealing independently, with allowable deductions for expenses incurred for the permanent establishment's business. Where application of the separate-enterprise standard is impossible or unreasonable, profits may be apportioned or estimated on a reasonable basis consistent with the Article; purchases of goods alone do not give rise to attributed profits.
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