1. Introduction

In some situations, an enterprise may receive income (in a Source State) that might have nexus with an erstwhile permanent establishment. In other words, income might be received subsequent to closure of the permanent establishment. Can the Source State tax such income in the year of receipt, in accordance with Art. 7 (Business profits), even though the permanent establishment no longer exists?

This article discusses an important issue under Art. 7 of tax treaties - can a Source State tax income as per Art. 7 of a tax treaty - after termination of a PE? For that, the article takes into account precedents from Austria, Belgium, Canada, Denmark, India, Netherlands and the United States.