Article 7 - paragraphs 4 to end

While each treaty is slightly different, the final paragraphs of Article 7 add the last bits of structure to how business profits are calculated.

Paragraph 4 in the Canada-Bulgaria is fairly common as it sets out that no profits will be allocated to a PE if only the purchase of goods or merchandise is done.  Others, such as the Canada-US treaty expand on that to ensure that the provision of management, executive or administrative functions will also not be allocated income.

There is sometimes another paragraph to ensure that the business profits should be calculated the same every year.

A final paragraph indicates that if the income is covered elsewhere in the treaty, you should not use Article 7.  This gives other paragraphs an override so that income such as dividends (for example) will be taxed under the appropriate article.

The Canada-US treaty adds a paragraph 7 to ensure that the business profits allocated to the PE must be derived from the assets and activities of the PE.