CUP (Comparable Uncontrolled Price)

Comparable Uncontrolled Price (CUP) is a method used to determine the appropriate transfer price for transactions between related parties, such as subsidiaries of a corporation. It involves comparing the price charged in a controlled transaction (between related entities) to the price charged in a similar uncontrolled transaction (between unrelated entities) in the open market. This helps ensure that the price set for transactions between related companies is fair and consistent with market rates, reducing the potential for tax manipulation and ensuring compliance with tax regulations.