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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:

  • (a) to the said permanent establishment; or
  • (b) to the sales, in that other State, goods and merchandise of same type as those that are sold by the permanent establishment, or similar in nature; or
  • (c) other commercial activities carried out in that other State of the same type as those that are carried out by the permanent establishment, or similar in nature.

(2) Subject to the provisions of paragraph (3) of this Article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, in each Contracting State there shall be attributed to that permanent establishment, profits that might have been earned if it had been a separate and distinct 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) In determining 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 this permanent establishment is situated or elsewhere. However, no deduction shall be allowed for the amount which would otherwise be paid (for purposes other than the reimbursement of expenses incurred) by the permanent establishment to the headquarters of the enterprise or to any one of its establishments by way of royalties, fees or other similar payments for the use of patents or other rights, or by way of commission for specific services rendered or for a management activity or, except in the case of a banking enterprise, as interest on moneys lent to the permanent establishment. In addition, when determining the profits of a permanent establishment, any sums which are charged by the permanent establishment to the headquarters of the enterprise or to any of its establishments shall not be included.

(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 an apportionment of the total profits of the enterprise to its various parts, the provisions of paragraph (2) of this Article shall not preclude that Contracting State from determining the profits to be taxed by such customary apportionment. However, the method of apportionment adopted shall be such that the result obtained is in accordance with the principles contained in this Article.

(5) No profits shall be attributed to a permanent establishment merely because the permanent establishment purchases property or merchandise on behalf of the enterprise.

(6) As per the previous paragraphs, the profits attributable to a permanent establishment shall be determined every year by the same method, unless there is a good and sufficient reason to proceed otherwise.

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