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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 Profits

(1) The profits of an enterprise in a Contracting State shall be taxable only in that State unless the enterprise carries out business in the other Contracting State through a permanent establishment. If the enterprise carries out business as aforesaid, the profits of the enterprise shall be taxable in the other Contracting State only to the extent that may be attributable to:

  • (a) that permanent establishment.
  • (b) sales of goods or merchandise in the other State of the same type or another type similar to the goods and merchandise sold through this permanent establishment.
  • (c) activities of other business carried out in the other State of the same type or another type similar to the goods and merchandise carried out by this permanent establishment.

(2) In accordance with the provisions of paragraph (3) hereof, if an enterprise in a Contracting State carries out business in the other Contracting State through a permanent establishment in the other Contracting State, the profits of the permanent establishment, in each Contracting State, shall be defined according to the profits that are generated in any of the Contracting States if the enterprise is independent as well as it similarly operates the same or similar activities under the same or similar conditions and deals wholly independently from the establishment that is considered its permanent establishment.

(3) While calculating the profits of the permanent establishment, the expenditures of the permanent establishment, including the executive and administrative expenses, whether incurred in the State of the permanent establishment or any other place may be deducted. However, such deduction for any amounts paid, if any, (otherwise paid for the reimbursement of actual expenses) by the permanent establishment of the Head Office of the enterprise or any other offices thereof by way of royalties, fees, or other similar payments for using the rights of patents or other rights; or by way of commissions for performing specific services, or for management (except for the banking enterprise), or by way of income of debt-claims with regard to funds lent to the permanent establishment. Similarly, when determining the profits of the permanent establishment, it shall not be taken into account the amounts (otherwise paid for the reimbursement of actual expenses) carried forward to the account of the Head Office of the enterprise by the permanent establishment or any other offices thereof by way of royalties, fees, or other similar payments for using the rights of patents or other rights; or by way of commissions for performing specific services, or for management (except for the banking enterprise), or by way of income of debt-claims with regard to funds lent to the permanent establishment.

(4) Notwithstanding the other provisions, the profits of business carried out by an enterprise in one of the Contracting States by exporting goods to the other Contracting State shall not subject to tax in the other Contracting State. If other activities practiced by a permanent establishment in the other Contracting State are included in the exportation contracts, the income gained from such activities may be subject to tax in the other Contracting State.

(5) The term “business profits” shall without limitation include income derived from manufacturing, trading, banking, insurance, internal transportations and providing services. Such term shall not include the income derived from professions performed by individuals as users or independently.

(6) When the profits include items of income that are treated separately in other articles of this Convention, the provisions of such articles shall not be affected by the provisions of this Article.