i) The Comparable Uncontrolled Price (CUP) method:
The CUP compares the price for property, goods, or services transferred in a controlled transaction to the price charged in a comparable uncontrolled transaction in comparable circumstances.

An uncontrolled price is the price agreed between independent parties for the transfer of property, goods, or services. If the transfer is in all material respects comparable to the transfer between related parties, the price becomes a comparable uncontrolled price.

Example:
Company A, resident in Ghana, manufactures chocolate which it sells at a price of GH¢100.00 per carton to a subsidiary in France but at a price of GH¢120.00 to an independent person also in France who carries out the same function as the subsidiary. Assuming all other factors of comparability, such as contractual terms, are the same, an amount of GH¢20.00 per carton sold should be added to Company A’s assessable income.

(4 marks)

ii) Situations where it is most appropriate to apply the CUP method include but are not limited to:

• Interest rate charged on borrowing between persons in a controlled relationship.
• Royalty charged on licensed intangible properties (e.g., trademark, design, copyright).
• Price charged for the sale of listed securities.

(Any 2 points @ 1 mark each = 2 marks)