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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.


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. In the event that such a permanent establishment exists, the profits of the enterprise from the activity of that permanent establishment shall be taxable only in the State where it is situated.

(2) The taxable income shall correspond to the amount of profits made by the permanent establishment, including, where appropriate, the profits or advantages derived indirectly from that establishment, or which would have been allotted or granted to third parties either by increasing or decreasing the purchase price or sale price, or by any other means.

(3) In determining the profits of a permanent establishment, there shall be allowed as deductions any expenses which are incurred directly for the purposes of the permanent establishment, as well as a proportionate share of general expenses, management and administrative expenses of the headquarters of the enterprise.

This proportionate share of expenses shall be attributed to the results of the different permanent establishments and the headquarters in proportion to the turnover accrued by each one of them.

Where the apportionment of the general expenses of the headquarters, under the conditions defined above, does not permit bringing out a normal profit, the competent authorities of the two States may, having regard to the provisions of Article 26 of the Convention, proceed to make the necessary adjustments in determining the profits of the permanent establishment.

The same rule shall apply when the said apportionment attributes to the permanent establishment situated in one of two States, a share which is significantly higher than the one that would result from the application of the domestic laws of the said State.

(4) Where taxpayers, whose business extends over the territories of both Contracting States, do not keep regular accounts showing, separately and exactly, the profits pertaining to the permanent establishments in either State, the profit to be taxed respectively by these States may be determined by apportioning the overall earnings in proportion to the turnover realized in each State.

(5) In cases where one of the permanent establishment located in either Contracting State does not realize a turnover or in cases where the activities in each State are not comparable, the authorities of both States shall work together to establish the terms of implementation of paragraphs (3) and (4) of this Article.

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

This provision shall not be construed as precluding a Contracting State from counting, while calculating the profits attributable to a permanent establishment situated therein, the profits from stocks, debt claims, rights or other assets that are effectively connected with such permanent establishment.

(7) The participations/investments of a partner in the profits of a company incorporated as a de facto partnership, corporate alliance or an economic interest grouping shall be taxable in the State where the said enterprise has a permanent establishment.