Tax method

The method of comparable uncontrolled price consists in comparing the price determined in transactions between related entities with the price used in comparable transactions by independent entities and on this basis determining the market value of the subject of the transaction concluded between related entities. Price comparisons are made in two forms:

  • internal price comparison – carried out on the basis of prices applied by a given entity on a given or comparable market in transactions with independent entities,
  • external price comparison – carried out on the basis of prices used
    in comparable transactions by other independent entities.

An internal and external price comparison is considered to be comparable if any possible difference between the transactions being compared or between the entities entering into those transactions would not materially affect the price of the subject of such a transaction on the free market, or reasonably accurate corrections can be made to eliminate the material effects of such differences.

Estimating the potential price effect of differences between transactions is particularly difficult when there are differences between the objects of the transactions. Therefore, MPCN can be used in the case of undifferentiated products, e.g. exchange commodities or raw materials, where any differences in the brand and characteristics of individual products should not have a significant impact on the transaction price. It is also necessary that the entities that participated in the compared transactions perform similar functions in them and bear a comparable risk.

Comparability of transactions: required by the provisions of Chapter 2 Study of the comparability of transactions in connection with Chapter 3 Methods of price verification of the Regulation of the Minister of Finance of December 21, 2018 on transfer pricing in the field of corporate income tax.

Mathematical formula:  There is no mathematical formula describing the comparable uncontrolled price method.