Permanent establishment taxation limits taxing rights to profits attributable to the PE under arm's length attribution. Profits of an enterprise are taxable only in the State of residence unless the enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment, related sales of similar goods, or similar business activities may be taxed there. Attribution follows the separate enterprise principle and arm's length dealings; deductions for expenses attributable to the permanent establishment are allowed subject to domestic law. The same attribution method should be used year to year unless there are good reasons to change, and mere purchases 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 taxation limits taxing rights to profits attributable to the PE under arm's length attribution.
Profits of an enterprise are taxable only in the State of residence unless the enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment, related sales of similar goods, or similar business activities may be taxed there. Attribution follows the separate enterprise principle and arm's length dealings; deductions for expenses attributable to the permanent establishment are allowed subject to domestic law. The same attribution method should be used year to year unless there are good reasons to change, and mere purchases do not give rise to attributed profits.
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