Article 48 - Basic Rule

(1) This Part applies when—
(a) conditions ("the actual conditions") have been made or imposed between any two AssociatedPersons in their commercial or financial relations by means of a transaction or series of transactions; and
(b) by reason of the actual conditions being made or imposed instead of the arm's length conditions there is, except for this Article, a reduction in the amount of the Chargeable Profits of a QFC Entity, being one of those AssociatedPersons ("the first taxpayer") for an Accounting Period.
(2) The "arm's length conditions" are the conditions that would have been made or imposed if the Persons were not Associated with each other and the term includes the case where no conditions would have been made or imposed as between Persons who were not Associated with each other.
(3) The Chargeable Profits of the first taxpayer shall be computed for tax purposes as if the arm's length conditions had been made or imposed as between the first taxpayer and the other Associated Person referred to in Article 48(1), instead of the actual conditions. A computation on that basis is referred to as a computation on the arm's length basis.
(4) For the purposes of this Part—
(a) references to a reduction in an amount of Chargeable Profits include references to a reduction to nil or to the accrual of a tax loss or an increased loss; and
(b) references to an increase in Chargeable Profits include references to the reduction in a tax loss whether to a smaller amount or to nil.
(5) This Part applies whenever the conditions in question were made or imposed, whether before, on or after these Regulations come into force.
Amended (as from 18th June 2014)