Plain English
Before you decide what a related-party price should be, you look at what unrelated parties actually pay for the same or similar thing. That real-world price is the uncontrolled price.
Technical definition
An uncontrolled price is the price agreed between enterprises that are not associated, whether in a transaction between one associated enterprise and an independent enterprise or between two independent enterprises. It serves as the foundation of the comparable uncontrolled price method.
Why it matters
It is the closest economic analogue to the arm's length principle in action. A reliable uncontrolled price often produces the strongest evidence of an arm's length outcome.
How it works in practice
- 01Identify the controlled transaction accurately.
- 02Search for internal comparables first (sales to or purchases from independent parties).
- 03If internal comparables are insufficient, search external databases.
- 04Adjust for differences in product, functions, risks, terms and circumstances.
- 05Use the adjusted uncontrolled price as the benchmark.
Worked example
Internal comparable for components
A parent sells widgets to a subsidiary for EUR 90 per unit. It also sells the same widgets to an independent distributor in a comparable market for EUR 100 per unit, after adjusting for volume and warranty differences. The EUR 100 adjusted price is a reliable uncontrolled price.
Common mistakes
- Comparing different products without adjustment.
- Ignoring geographic or volume differences.
- Using list prices instead of actual transaction prices.
- Treating any third-party price as automatically comparable.
Audit red flags
- No uncontrolled transactions in the same line of business.
- Uncontrolled price is a distressed or one-off sale.
- Adjustments are large and unsupported.
Documentation & data
Documents to hold
- Intercompany and third-party agreements.
- Pricing policies and discount schedules.
- Comparable adjustment working papers.
- Evidence of actual transaction terms.
Data you need
- Internal and external transaction prices.
- Volume and terms data.
- Market and geographic comparability factors.
- Product specifications.
Who owns this internally: Transfer pricing team; sales and procurement provide uncontrolled price data.
Jurisdiction notes
- OECD
- The CUP method is described in Chapter II of the OECD Guidelines and relies on reliable uncontrolled prices.
Notes by role
Students & job seekers
This concept underpins the CUP method. Be ready to explain internal versus external comparables.
Frequently asked
- Is an uncontrolled price always external?
- No. Internal comparables — transactions between one associated party and an independent party — are often preferred because they share more facts with the controlled transaction.
Sources & status
- Primary source
OECD Transfer Pricing Guidelines, Chapter II
OECD, 2022
Reference material only, not advice on a specific fact pattern. Reviewed 2026-06-30.
Careers
How this shows up in the job
Interviewers love asking why internal comparables can be more reliable than external ones. The answer: shared product, shared group systems, and fewer unknowns.
Careers in transfer pricing