CUP (Comparable Uncontrolled Price): Definition and Conditions
The CUP method defined: pricing a controlled transaction at the price an unrelated party pays for an identical product or service under comparable circumstances.
Definition
The comparable uncontrolled price (CUP) method determines the arm’s length price directly: it is the price an unrelated party pays for an identical product or service under comparable circumstances. It is the most direct of the OECD methods — price the transaction at the independent price — and, where a genuine uncontrolled price exists, the best method rule points at it first.
“Identical” is the condition that decides everything: same product or service, same terms, same market (or markets whose differences are adjustable), same quantity, same timing. A price from a similar product in a different market is not a CUP — it is a weaker form of evidence, and the method has to be documented as the weaker thing it is.
Formula
Arm's length price = the uncontrolled price for the identical transaction
(± documented adjustments for the differences that matter)There is no pool, no PLI, no range in the pure form — the comparison is the price itself.
Example
An Indian manufacturer sells a commodity chemical to its subsidiary at ₹82 /kg. Unrelated third-party buyers pay ₹85–87/kg for the identical grade, identical contract terms, same delivery market. The CUP is the ₹85–87 band; the controlled price is below it, and the file’s job is to show whether the differences (volume, timing, credit) are real and quantified — or the price moves to the uncontrolled level.
See also
FAQ
Where do uncontrolled prices come from? Internal third-party sales of the same product, published commodity prices, exchange-reported prices, and unrelated-party contracts in the same market. The source must be stated, and the price must be for the identical transaction — the “uncontrolled” label does the identifying, the source does not.
CUP or TNMM for a service transaction? CUP only where an unrelated party pays for the same service on comparable terms — which for most bespoke services it does not. A service priced at “the market rate” without an actual uncontrolled service price is a CUP claim without a CUP; the defensible method for routine services is usually TNMM or cost plus on the service line.
Run the screens as a study, not a spreadsheet
Quartyl applies the method, PLI and screening steps above as a pipeline — and keeps a documented reason for every exclusion.
Related docs
Best Method Rule: How the OECD Chooses the Right Method
The best method rule defined: the method providing the most reliable measure of the arm's length result, given the comparability, the data and the assumptions available.
Read docThe Arm's Length Principle Explained (OECD and India)
The arm's length principle in full: the OECD Article 9 standard, India's section 92, how a price gets tested against independent evidence, and how the principle shows up in an audit.
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