Article 7 - Business profits

Permanent establishment attribution allows taxation of profits attributable to the PE based on arm's length principles and allowable deductions.

Profits are taxable in the State of residence unless an enterprise carries on business in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment, related sales, or similar activities may be taxed there. Attribution is determined as if the permanent establishment were a distinct and independent enterprise dealing at arm's length, allowance is made for expenses incurred for the permanent establishment's business subject to the taxing State's laws, and transactions that are not reimbursements between head office and offices do not alter profits attributable to the permanent establishment.