Tipi Tips #10: What is the external comparable uncontrolled price method?

Today’s topic is the external comparable uncontrolled price method.

One of the transfer pricing methods is the external comparable uncontrolled price method. We will use a seller of apples as a common example for each method. When a seller sells apples to a related party, we have to check whether the transfer pricing is ok. We want to see whether the price is the same as what a third party would pay. This makes things fair.

The external CUP method simply looks at the prices for the same or similar apples charged by competitors. This gives us an idea of the market price for the apples. When the seller sells the apples to the related party using this market price, then the transaction is at arm’s length.

And that is how the external CUP method works.

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Founder Tipi Consultancy