Page 64 - Strategic Tax Planning for Global Commerce & Investment

Tax Benefits for U.S. Exporters

Differences Between Similar Products or Services

The first step in applying the direct CUP method is to categorize
the total differences between the controlled transactions and the
uncontrolled transactions into one of the following four
categories:

1. No differences
2. Minor differences
3. More than minor differences
4. Material product differences

Applying Relevant Comparability Criterion

The enterprise is then to apply the relevant comparability
criterion to one of the above four categories as shown in the
following table:

Categories Relevant Comparability Criterion
This method will be the most direct and reliable
1 No differences method of determining arm’s-length price, the best
method applies
Differences are definite and reasonably ascertainable
and adjustments for differences can be made, the
Minor
2 method will be the most direct and reliable method
differences
for determining Arm’s-length price, the best method
applies
More than The CUP method can be used, but reliability of
3 minor results is reduced, the CUP method may not be the
differences best method
Material Reliable adjustments cannot be made, the CUP
4 product method is not the best method
differences

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