The OECD’s preferred method, outlined in its 2010 Report , uses a two-step analysis to attribute profits:
: Tax authorities may challenge "notional" payments (like internal interest or royalties) between a head office and its branch. The Attribution of Profits to Permanent Establi...
: Profit attribution is limited to the actual profits earned by the MNC as a whole from the activity the PE participated in. The OECD’s preferred method, outlined in its 2010
The attribution of profits to a Permanent Establishment (PE) is the tax process of determining how much of a multinational enterprise's (MNC) total profit should be taxed in the country where its PE is located. This process is governed by of the OECD Model Tax Convention and similar provisions in bilateral tax treaties. 1. Core Concept: The Separate Entity Approach The OECD’s preferred method