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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 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 of the enterprise may be taxed in the other State, but only so much of them as are attributable to that permanent establishment.

(2) Where an enterprise of a Contracting State carries on its business in the other Contracting State through a permanent establishment situated therein, then in each  Contracting State, the profits attributable to that permanent establishment, shall be those which the permanent establishment could have earned if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly and independently with the enterprise of which it is a permanent establishment.

(3) To determine the profits of a permanent establishment, there shall be allowed as deductions, expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses, whether incurred in the State in which the permanent establishment is situated or elsewhere. In the latter case, a pro-rate proportion of the general expenses of the headquarters of the enterprise may be attributed to the earnings of the different permanent establishments in proportion to the sales earned by each of them.

(4) Insofar as it has been customary in a Contracting State to determine the profits to be attributed to a permanent establishment on the basis of distribution of the total profits of the enterprise among its various parts, no provision of paragraph (2) of this Article shall prevent such Contracting State from determining the profits to be taxed in such a manner. However, the method of distribution adopted must be such that the result obtained must comply with the principles contained in this Article.

(5) Where the allocation of the general expenses of the headquarters of the enterprise in accordance with the conditions defined in paragraph (3) or the distribution of any profits set forth in paragraph (4), does not make it possible to release the normal quota or normal profits, the competent authorities of the two Contracting States can, taking into account the provisions of Article 25 of this Convention, proceed with the necessary reassessments to determine the profits of the permanent establishment.

(6) No profits shall be attributed to a permanent establishment if the permanent establishment merely purchases goods or merchandise for the enterprise.

(7) For the purposes of the preceding paragraphs, the profits to be attributed to a permanent establishment shall be determined every year by the same method, unless there is a good and sufficient reason to proceed otherwise.

(8) Where profits include items of income that are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.