comparable uncontrolled price (CUP)

The Comparable Uncontrolled Price (CUP) method is a way to determine the arm’s-length price for transactions between related parties, like a parent company and its subsidiary. It does this by comparing the price of goods or services in a controlled transaction to the price in similar, uncontrolled transactions between unrelated parties under similar circumstances. Essentially, it usesmarket data from third-party dealings to ensure transfer prices are fair and consistent with what would be agreed upon in open, competitive markets. This method helps authorities and companies verify that prices set within multinational groups are appropriate for tax compliance and fairness.