Permanent establishment profit attribution limits taxation to profits attributable to the permanent establishment under separate enterprise principles.

Profits are taxable only in the residence State unless business is carried on in the other State through a permanent establishment, in which case only profits attributable directly or indirectly to that permanent establishment may be taxed there. Attribution must follow the separate and independent enterprise principle, allowing deductions for expenses incurred for the permanent establishment's business under the tax law limitations of the State where it is situated. Customary apportionment may be used if consistent with the Article's principles; no profits arise solely from purchase of goods, and the attribution method should remain consistent year to year.

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