(1) The profits of an enterprise of a Contracting State shall be
taxable only in that State unless the enterprise carries on busi-
ness in the other Contracting State through a permanent estab-
lishment 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 is attributable to that perma-
nent establishment.
(2) Subject to the provisions of paragraph 3, where an enter-
prise of a Contracting State carries on business in the other Con-
tracting State through a permanent establishment situated there-
in, there shall in each Contracting State be attributed to that
permanent establishment the profits which it might be expected
to make if it were a distinct and separate enterprise engaged in
the same or similar activities under the same or similar condi-
tions and dealing wholly independently with the enterprise of
which it is a permanent establishment.
(3) In the determination of the profits of a permanent estab-
lishment, there shall be allowed as deductions expenses which
are incurred for the purposes of the business of the permanent
establishment including executive and general administrative ex-
penses so incurred, whether in the State in which the permanent
establishment is situated or elsewhere. However, no such
deduction shall be allowed in respect of amounts, if any, paid
(otherwise than towards reimbursement of actual expenses) by
the permanent establishment to the head office of the enterprise
or any of its other offices, by way of royalties, fees, or other sim-
ilar payments in return for the use of patents or other rights, or by
way of commission, for specific services performed or for man-
agement, or, except in the case of a banking enterprise, by way
of interest on moneys lent to the permanent establishment. Like-
wise, no account shall be taken, in the determination of the prof-
its of a permanent establishment, for amounts charged (other-
wise than towards reimbursement of actual expenses), by the
permanent establishment to the head office of the enterprise or
any of its other offices, by way of royalties, fees or other similar
payments in return for the use of patents or other rights, or by
way of commission for specific services performed or for man-
agement, or, except in the case of a banking enterprise by way of
interest on moneys lent to the head office of the enterprise or any
of its other offices.
(4) Insofar as it has been customary in a Contracting State to
determine the profits to be attributed to a permanent establish-
ment on the basis of an apportionment of the total profits of the
enterprise to its various parts, nothing in paragraph 2 shall pre-
clude that Contracting State from determining the profits to be
taxed by such an apportionment as may be customary; the
method of apportionment adopted shall, however, be such that
the result shall be in accordance with the principles contained in
this Article.
(5) No profits shall be attributed to a permanent establishment
by reason of the mere purchase by that permanent establishment
of goods or merchandise for the enterprise.
(6) For the purposes of the preceding paragraphs of this Arti-
cle, 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.
(7) Where profits include items of income which are dealt with
separately in other Articles of this Agreement, then the provisions
of those Articles shall not be affected by the provisions of this
Article.