Permanent establishment rules determine taxable business profits and the method for attributing PE income.

Article 7 allocates taxation of business profits to the resident State unless an enterprise carries on business through a permanent establishment in the other State, in which case profits attributable to that PE may be taxed where it is situated. Profits are attributed as if the PE were a distinct and separate enterprise dealing independently; customary apportionment may be used if consistent with the Article. Deductions for expenses incurred for the PE are allowed, but payments between PE and head office (other than reimbursement of actual expenses) for royalties, fees, commissions, management charges and, except for banks, interest are disregarded. No profits arise from mere purchase of goods, methods must be applied consistently year to year, and separately dealt income remains subject to other Articles.

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