Deduction of expenditure of a permanent establishment is given express recognition in art. 7(3) of the OECD Model. For example, that article in the UK-Macedonia Treaty reads:

‘7(3) In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purposes of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.’

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