835U. Low profit margin exemption

(1) In this section, ‘relevant operating costs’ means the operating costs, as construed in accordance with international accounting standards or generally accepted accounting practice, incurred by a controlled foreign company for an accounting period, but excluding—

(a) the costs of goods purchased by the controlled foreign company, other than goods used by the company in the territory in which it is resident for the accounting period, and

(b) any amounts incurred on behalf of, or paid to, an associated company.

(2) Subject to subsection (3), where in an accounting period the accounting profits of a controlled foreign company are less than 10 per cent of its relevant operating costs, section 835R shall not apply.

(3) Subsection (2) shall not apply where—

(b) any arrangements are entered into,

(b) as a consequence of such arrangements subsection (2) would, apart from this subsection, apply, and

(c) it would be reasonable to consider that the main purpose, or one of the main purposes, of the arrangements is to secure that subsection (2) applies.