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of <h1>Article 7 of DTAA: Taxation of Business Profits and Permanent Establishment Rules Explained</h1> Article 7 of the Double Tax Avoidance Agreement (DTAA) between two contracting states addresses the taxation of business profits. Profits from an enterprise in one state are taxable only there unless the business operates through a permanent establishment in the other state. Profits attributable to such an establishment can be taxed in the other state. Deductions are allowed for expenses incurred by the permanent establishment, but not for payments to the head office for royalties or services, except for banking interest. Profits cannot be attributed solely based on purchases by the establishment. Customary profit apportionment methods are permitted, and consistent methods should be used annually unless justified otherwise.
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