(1)Where a member of a multinational group is a permanent establishment falling within paragraph (a) of section 232(2) (entity treated as permanent establishment in accordance with tax treaty), its underlying profits are to be adjusted so that they only reflect amounts of income and expenses that are attributable to it in accordance with the tax treaty in accordance with which it is treated as a permanent establishment (regardless of whether an amount of income is subject to tax or not, or an amount of expenses are deductible or not).
(2)Where a member of a multinational group is a permanent establishment falling within paragraph (b) of section 232(2) (permanent establishment taxed on similar basis to residents in absence of tax treaty), its underlying profits are to be adjusted so that they only reflect amounts of income and expenses that are attributable to it in accordance with the law of the territory in which the member is located (regardless of whether an amount of income is subject to tax or not, or an amount of expenses are deductible or not).
(3)Where a member of a multinational group is a permanent establishment falling within paragraph (c) of section 232(2) (permanent establishment located in territory without corporate income tax), its underlying profits are to be adjusted so that they only reflect amounts of income and expenses that would have been attributed to it in accordance with Article 7 of the OECD tax model.