»Ê¹ÚÌåÓýapp

»Ê¹ÚÌåÓýapp business profits of an enterprise of one country can only be taxed in the other country if the enterprise carries on business in that other country through a permanent establishment. Only the profits attributable to that permanent establishment can be taxed in the other country.

»Ê¹ÚÌåÓýapp profits to be attributed to the permanent establishment are those which it might be expected to make if it were a separate enterprise from the one of which it is a permanent establishment and dealing independently with the enterprise. In other words the profits of any permanent establishment have to be calculated on an `arm’s lengthâ€� basis. In calculating its profits the permanent establishment is entitled to deduct not only the expenses incurred for its purposes but also a reasonable proportion of the general administrative and executive expenses which are incurred for the purposes of the enterprise as a whole and whether incurred in the country where the permanent establishment is located or elsewhere.

As indicated at (e) of INTM153040 an enterprise of a contracting state is defined as an enterprise carried on by a resident of a contracting state. See INTM154010 onwards for guidance regarding residence for agreement purposes.

Information about tax credit relief for foreign tax charged on permanent establishments of United Kingdom enterprises situated in a foreign country can be found at INTM163030 onwards.