background image
Note: This Treaty may be impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). MLI impact on Tax Treaties is available with the Orbitax International Tax Research & Compliance Expert.

ARTICLE 7

BUSINESS AND INDUSTRIAL PROFITS

(1) Profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits that are attributable to the permanent establishment may be taxed in that other State.

(2) Notwithstanding to the provisions of paragraph (3) hereof, the profits that are attributable in each Contracting State to the permanent establishment are the profits it might be expected to make, in particular in its dealings with other parts of the enterprise, if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions, taking into account the functions performed, assets used and risks assumed by the enterprise  through the permanent establishment and through the other parts of the enterprise.

(3) While calculating the profits of the permanent establishment, the expenditures of the permanent establishment including the executive and administrative expenses may be deducted, whether in the Contracting State where the permanent establishment is located or in any other state, provided that such expenses shall be deductible in accordance with the laws of both Contracting States wherever the permanent establishment is located.

However, such deduction shall not be allowed if the amounts previously paid (except amounts of actual costs) by the permanent establishment to the headquarters of the enterprise or any of the offices thereof are in a form of royalties, fees or any other similar expenditures for the use of patents or any other rights; or in a form of commission for specific services carried out or for an activity of the management; or in form of an interest, except for a bank, on money already lent to the permanent establishment. The amounts due (except amounts of actual costs) for the permanent establishment to the headquarters of the enterprise or any of the offices thereof are in a form of royalties, fees or any other similar expenditures for the use of patents or any other rights; or in a form of commission for specific services carried out or for an activity of the management; or in form of an interest, except for a bank, on money already lent to the permanent establishment.

(4) If it is customary in a Contracting State to determine the profits of a permanent establishment upon the relative distribution of total profits of the enterprise on the different parts thereof, the provisions of paragraph (2) hereof shall not prevent such Contracting State from the determination of the profits which are subject to tax upon the customary relative distribution, provided that the method used shall be compatible with the provisions hereof.

(5) For the purposes of the preceding paragraphs hereof, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason to the contrary.

(6) If the profits include items of income separately addressed by other articles herein, therefore the provisions of this article may not prejudice the provisions of such articles.