Permanent establishment rules determine when an enterprise's profits may be taxed in the other Contracting State.

Profits of an enterprise are taxable only in its State of residence unless the enterprise carries on business in the other Contracting State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed there. Attributable profits are those the permanent establishment would earn as a distinct and separate enterprise dealing independently under similar conditions. Deductions are allowed for expenses incurred for the permanent establishment's business subject to local tax law limits; mere purchase of goods does not give rise to attributed profits. The same attribution method applies year to year unless justified otherwise, and other Articles govern separately dealt-with income items.

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