TPcases

Database of Transfer Pricing Case Laws

Poland issues Tax clarifications on transfer pricing – No. 3: CUP method

Posted on March 31, 2021 | By TP News | No comments

Category: Transfer Pricing News | Tag: Application of the CUP method, Comparability factors, Comparable Uncontrolled Price method (CUP), Internal CUP

« Prev | Next »

31 March 2021 the Polish Ministry of Finance published tax explanations on transfer pricing No. 3 regarding the CUP method

The explanations covers:

the rationale for using the comparable uncontrolled price method,
variants of the comparable uncontrolled price method,
comparison of the comparable uncontrolled price method with other methods,
typical areas of application of the comparable uncontrolled price method,
difficulties in applying the comparable uncontrolled price method,
example of using the comparable uncontrolled price method.

Click here for unofficial English translation

Related Guidelines

TPG2022 Chapter II paragraph 2.17In considering whether controlled and uncontrolled transactions are comparable, regard should be had to the effect on price of broader business functions other than just product comparability (i.e. factors relevant to determining comparability under Chapter I). Where differences exist between the controlled and uncontrolled transactions or between the enterprises undertaking...

TPG2022 Chapter X paragraph 10.95Whereas it is unlikely that an MNE group’s average interest rate paid on its external debt meets the comparability requirements to be considered as an internal CUP, it may be possible to identify potential comparable loans within the borrower’s or its MNE group’s financing with an independent lender as the...

TPG2022 Chapter III paragraph 3.28On the other hand, internal comparables are not always more reliable and it is not the case that any transaction between a taxpayer and an independent party can be regarded as a reliable comparable for controlled transactions carried on by the same taxpayer. Internal comparables where they exist must satisfy...

TPG2022 Chapter II paragraph 2.20For the CUP method to be reliably applied to commodity transactions, the economically relevant characteristics of the controlled transaction and the uncontrolled transactions or the uncontrolled arrangements represented by the quoted price need to be comparable. For commodities, the economically relevant characteristics include, among others, the physical features and quality...

TPG2022 Chapter II paragraph 2.16It may be difficult to find a transaction between independent enterprises that is similar enough to a controlled transaction such that no differences have a material effect on price. For example, a minor difference in the property transferred in the controlled and uncontrolled transactions could materially affect the price even...

TPG2022 Chapter II paragraph 2.15Following the principles in Chapter I, an uncontrolled transaction is comparable to a controlled transaction (i.e. it is a comparable uncontrolled transaction) for purposes of the CUP method if one of two conditions is met: a) none of the differences (if any) between the transactions being compared or between the...

TPG2022 Chapter VI paragraph 6.147In some situations, intangibles acquired by an MNE group from independent enterprises are transferred to a member of the MNE group in a controlled transaction immediately following the acquisition. In such a case the price paid for the acquired intangibles will often (after any appropriate adjustments, including adjustments for acquired...

TPG2022 Chapter VI paragraph 6.146Where reliable comparable uncontrolled transactions can be identified, the CUP method can be applied to determine the arm’s length conditions for a transfer of intangibles or rights in intangibles. The general principles contained in paragraphs 2.14 to 2.26 apply when the CUP method is used in connection with transactions involving...

TPG2022 Chapter II paragraph 2.24The CUP method is a particularly reliable method where an independent enterprise sells the same product as is sold between two associated enterprises. For example, an independent enterprise sells unbranded Colombian coffee beans of a similar type, quality, and quantity as those sold between two associated enterprises, assuming that the...

TPG2022 Chapter II paragraph 2.23The following examples illustrate the application of the CUP method, including situations where adjustments may need to be made to uncontrolled transactions to make them comparable uncontrolled transactions....

Supplemental Guidance

Costa Rica vs GlaxoSmithKline Costa Rica S.A., February 2022, Supreme Court, Case No 383-2022 (4-001638-1027-CA)GlaxoSmithKline Costa Rica applied TNMM with return on total costs to price controlled transactions for FY 2004 and 2005. The Costa Rican tax authority rejected this approach and applied the internal CUP method, finding identical products were sold to related parties at significantly lower prices than to independent customers. The...

Argentina vs Dart Sudamericana S.A., March 2023, Tax Court, Case No 35.050 I (IF-2023-35329672-APN-VOCII#TFN)Dart Sudamericana imported EPS T601 pellets from a related party and applied the CUP method to price the controlled transactions. The Argentine tax authority rejected CUP, applying TNMM instead and assessing additional taxable income. The Tax Court upheld the adjustment in 2023, ruling that the taxpayer had only demonstrated product...

Kenya vs Beta Healthcare International Limited, February 2024, Tax Appeals Tribunal, Appeals No 866 of 2022 – [2024] KETAT 143 (KLR)Following an audit of Beta Healthcare International Limited, a Kenyan subsidiary of the Aspen Healthcare Group, the Kenya Revenue Authority applied the CUP method rather than the TNMM used by the company to determine arm's length prices. The Tax Appeals Tribunal dismissed the company's appeal in 2024, finding insufficient evidence...

Poland vs F. S.A., August 2025, Supreme Administrative Court, Case No II FSK 1463/22A Polish company specialising in e-grocery logistics was assessed for additional taxable income after tax authorities applied the transactional net margin method and challenged its intra-group service pricing. The Tax Administration Chamber and Administrative Court annulled the assessment over inappropriate comparables. The Supreme Administrative Court, ruling in August 2025, rejected...

Türkiye vs Pharmaceutical Industry and Trade Corporation, December 2011, Danıştay Üçüncü Dairesi, E. 2009/2352, K. 2011/7637, UYAP, 20.12.2011.A Turkish pharmaceutical company purchased active ingredients from foreign group companies at prices the tax authority deemed above market, alleging hidden profit distribution with deviations of 150–975%. The tax court ruled in favour of the taxpayer in December 2011, finding that the CUP analysis lacked sufficient comparability data, as ingredient...

Italy vs E.I. S.r.l., February 2021, Regional Tax Commission, Case No 12/02/2021 n. 546/9An Italian company priced transactions with a related Spanish entity using the cost-plus method. The tax authority issued an assessment based on an internal CUP with an independent party where prices were higher. The taxpayer successfully argued the difference reflected volume discounts. The Regional Tax Commission dismissed the tax authority's...

Italy vs Recordati Industria Chimica e Farmaceutica S.p.A, September 2017, Supreme Court, Case No 20805Recordati Industria Chimica e Farmaceutica faced a transfer pricing assessment for FY2003 covering 29 disputed issues. Italy's Supreme Court ruled predominantly in favour of the tax authority, confirming that transfer pricing adjustments do not require proof of a concrete tax advantage. The court held that intercompany transactions at below-normal prices...

Indonesia vs SK Group Indonesia, October 2014, Tax Court, Put.56237/2014SK Group Indonesia sold lube base oil to its Singapore affiliate using the Transactional Net Margin Method. Indonesian tax authorities issued an adjustment, arguing the Comparable Uncontrolled Price method was more appropriate and that the transactions were underpriced. The Tax Court ruled in favour of the taxpayer in October 2014,...

TPcases

Poland issues Tax clarifications on transfer pricing – No. 3: CUP method

Related Guidelines

Supplemental Guidance

Leave a Reply

Related Case Law