Section 371MB | The basic rule

(1)The low profit margin exemption applies for a CFC's accounting period if the CFC's accounting profits for the period are no more than 10% of the CFC's relevant operating expenditure.

(2)In this section references to the CFC's accounting profits are to those profits as determined before any deduction for interest.

(3)The CFC's “relevant operating expenditure” is its operating expenditure brought into account in determining its accounting profits for the accounting period, excluding—

(a)the cost of goods purchased by the CFC, other than goods used by the CFC in the territory in which it is resident for the accounting period, and

(b)any expenditure which gives rise, directly or indirectly, to income of a person related to the CFC.