- 1
- In respect of paragraph 1 of Article 7, profits derived from the sale of goods or merchandise of the same or similar kind as those sold, or from other business activities of the same or similar kind as those effected, through a permanent establishment, may be considered attributable to that permanent establishment if it is proved that this transaction has been resorted to in order to avoid taxation in the State where the permanent establishment is situated.
- 2
- In respect of paragraphs 1 and 2 of Article 7, where an enterprise of one of the States sells goods or merchandise or carries on business in the other State through a permanent establishment situated therein, the profits of that permanent establishment shall not be determined on the basis of the total amount received by the enterprise, but shall be determined only on the basis of the remuneration which is attributable to the actual activity of the permanent establishment for such sales or business. Especially, in the case of contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits of such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract which is effectively carried out by the permanent establishment in the State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the State of which the enterprise is a resident.
- 3
- In respect of paragraph 3 of Article 7, in determining the profits of a permanent establishment there shall not be allowed as deductions payments for interest, royalties, commissions or other similar payments made to the head office of the enterprise itself or to other permanent establisments for sharing all or part of the losses or expenses of the head office of the enterprise itself or of other permanent establishments located abroad. However the permanent establishment may, in accordance with paragraph 3 of Article 7 of the Agreement, deduct interest, royalties, commissions or other similar payments (including expenses for research or development) incurred for the purposes of the permanent establisment.
