Plain English
The most direct test there is: what did someone charge for the same thing in an open-market deal? Powerful when the product and terms genuinely match, fragile when they do not, because small product differences move price a lot.
Technical definition
Comparison of the price for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances.
Why it matters
Where it applies, it is the most reliable method and hard for an authority to displace. Commodities, listed financial instruments, and standard licences are its natural habitat.
How it works in practice
- 01Identify an internal CUP: the same group selling to or buying from an independent party.
- 02If none, search for external CUPs in commodity indices, loan databases, or royalty databases.
- 03Test comparability on product characteristics, contractual terms, volume, market and timing.
- 04Make adjustments only where they can be made reasonably accurately.
Worked example
Commodity sale
An intra-group sale of refined copper priced by reference to the quoted LME price on the shipment date, adjusted for an agreed treatment charge, applies a CUP directly. The quoted price is the comparable; the documentation must fix the pricing date convention in advance.
Common mistakes
- Using a headline royalty rate from a database without checking scope, territory and exclusivity.
- Adjusting away material product differences to force the method to work.
- Ignoring volume rebates present in the third-party deal.
Audit red flags
- Pricing date chosen retrospectively to favour one side.
- Single external CUP with no corroboration.
Documentation & data
Documents to hold
- Third-party contracts used as comparables.
- Price adjustment computations and index sources.
Data you need
- Transaction-level price data.
- Contract terms for both sides.
Who owns this internally: Commercial teams generate the data; tax sets the pricing convention.
Jurisdiction notes
- OECD
- Chapter II contains specific guidance on commodity transactions and the use of quoted prices, including the deemed pricing date rule.
Notes by role
CFOs & finance leaders
If your business trades a quoted commodity, expect authorities to look for CUP first regardless of your preferred policy.
Frequently asked
- Is an internal CUP always better than an external one?
- Usually, because the terms and circumstances are easier to verify, but only if the comparability is real.
Sources & status
- Primary source
OECD Transfer Pricing Guidelines, Chapter II, Part II, Section B
OECD, 2022
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Commodity-heavy groups hire specialists for exactly this. Knowing quoted-price mechanics is a niche worth having.
Careers in transfer pricing