Introduction
This article of the treaty talks about following points:
1 – The business profits of a resident of a Contracting State shall be taxable only in the State unless the resident carries on business in the other Contracting State through a permanent establishment situated therein.
2 – If a resident of a Contracting State carries on, or has carried on, business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the business profits which it might be expected to make if it were distinct and separate person engaged in the same or similar activities under the same of similar conditions and dealing wholly independently with the resident and with any other person related to the resident.
3 – In determining the business profits of a permanent establishment, there shall be allowed as deductions expenses which incurred for the purposes of the permanent establishment.
4 – No business profits shall be attributed to a permanent establishment of a resident of a Contracting Estate by reason of the use thereof for either the mere purchase of goods or merchandise or the mere provision of executive, managerial or administrative facilities or services for such resident.
5 – The business profits attributed to a permanent establishment shall be determined by the same method year by year.
References:
Advisor’s Guide to Canada – U.S. Tax Treaty
By: Vitaly Timokhov, Raymond Montero, David Kerzner
Published by: Thomson Carswell
The Accounting and Tax