(1) The cost plus method determines whether the amount charged in a controlled transaction gives rise to an arm's length result by reference to the cost plus markup realised in a comparable uncontrolled transaction.
(2) The following steps shall apply in determining the arm's length result under the cost plus method, namely:-
(a) determine the costs incurred by the person in a controlled transaction;
(b) to this amount is added a mark up (referred to as the "cost plus mark up" to make an appropriate profit in light of the functions performed and market conditions; and
(c) the sum of the amounts referred to in clauses (a) and (b) is the arm's length result.
(3) The cost plus mark up of a person in a controlled transaction may be determined by reference to:-
(a) the cost plus mark up that the person earns in a comparable uncontrolled transaction; or
(b) the cost plus mark up that an independent person earns In comparable uncontrolled transaction.
