Permanent establishment profit attribution confines taxation to profits attributable to the PE and allows related expense deductions. Profits of an enterprise are taxable only in the State of residence unless the enterprise operates in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attribution treats the permanent establishment as a distinct and separate enterprise; allowable deductions include expenses incurred for the PE's business, including executive and administrative costs incurred domestically or abroad. Customary apportionment of total enterprise profits is permitted if it aligns with these attribution principles. No profits are attributed solely for purchases made by the permanent establishment, and the chosen method must be applied year to year absent sufficient reason to change.