Are PHP include paths relative to the file or the calling code?

I’m having trouble understanding the ruleset regarding PHP relative include paths. If I run file A.PHP- and file A.PHP includes file B.PHP which includes file C.PHP, should the relative path to C.PHP be in relation to the location of B.PHP, or to the location of A.PHP? That is, does it matter which file the include is called from, or only what the current working directory is- and what determines the current working directory?