ARTICLE 7

Business Profits

(1) Industrial or commercial profits of a resident of one of the Contracting States shall be exempt from tax by the other Contracting State unless such resident is engaged in industrial or commercial activity in that other Contracting State through a permanent establishment situated therein. If such resident is so engaged, tax may be imposed by that other Contracting State on the industrial or commercial profits of such resident but only on so much of such profits as are attributable to the permanent establishment.

(2) Where a resident of one of the Contracting States is engaged in industrial or commercial activity in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to the permanent establishment the industrial or commercial profits which would be attributable to such permanent establishment if such permanent establishment were an independent entity engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the resident of which it is a permanent establishment.

(3) In the determination of profits of a permanent establishment, deductions shall be allowed for expenses incurred for the purposes of the permanent establishment, including costs and general expenses related to services rendered for the benefit of the permanent establishment whether rendered in the state where the permanent establishment is located or elsewhere.

(4) (a) The term "industrial or commercial profits of a resident" means income derived from an industrial, commercial, agricultural or mining activity, from fishing, from the operation of ships or aircraft, from the rental of personal property, and from insurance. It also means income derived from real property and natural resources, dividends, interest, royalties (as described in Article 12), and capital gains, but only if the property or the rights giving rise to such income, dividends, interest, royalties or capital gains are effectively connected with a permanent establishment which the recipient, being a resident of one of the Contracting States, has in the other Contracting State. It does not include income received by an individual in the form of remuneration for services rendered as an employee or in the exercise of an independent profession.

(b) To determine whether property or rights are effectively connected with a permanent establishment, the factors taken into account shall include whether the rights or property are used in or held for use in carrying on industrial or commercial activity through such permanent establishment and whether the activities carried on through such permanent establishment were a material factor in the realization of the income derived from such property or rights. For this purpose, due regard shall be given to whether or not such property or rights or such income were accounted for through such permanent establishment.

(5) Where industrial or commercial profits include items of income which are dealt with separately in other articles of this Convention, the provisions of those articles shall, except as otherwise provided therein, supersede the provisions of this article.