Choosing a method — CUP: is this a do-it-yourself job?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: where a close comparable exists — a commodity, a licence with public terms — it is the most reliable method available.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
When can the CUP method actually be used?
When there is a genuinely comparable transaction to compare with. In practice that means a commodity with an observable price, a licence whose terms are public, or a transaction the group itself has with an unrelated party on similar terms. Where such a comparable exists it is the most direct method available and the most reliable, because it compares prices rather than inferring them from margins. The limitation is how seldom the condition is met. Most intercompany dealings, such as bespoke components, integrated services and intangibles used only within the group, have no close equivalent in the open market, and forcing a comparison produces a precise-looking answer built on differences nobody has priced.
Can we use our own third-party sales as a comparable?
That is often the most useful comparable available, because the group's own transactions with unrelated parties can be examined in full: the contract, the volumes, the delivery terms, the credit terms and the market served. What has to be tested is whether the third-party deal is really like the intercompany one. Differences in volume, in who carries the freight, in payment terms, in the length of the relationship and in the market all move price, and each difference has to be either immaterial or capable of adjustment. Where the group sells to both related and unrelated customers on broadly similar terms, this is the first place to look.
How many adjustments are too many for a CUP?
There is no count that answers this. The test is reliability, not arithmetic. Each adjustment made to bridge a difference between the comparable and the intercompany transaction introduces an estimate, and the estimates accumulate. At the point where the adjustments are doing more work than the observed price, so that the answer depends mainly on how you quantified the volume difference and the delivery terms rather than on the market price you started from, the method has stopped being the direct one. Reliability then shifts to a margin-based method, which does not demand the same precision on individual differences. Say in the file which way the balance fell, and why.
Is a published commodity quotation a valid comparable price?
It can be the basis of one, and the work sits in the distance between the quotation and your transaction. A quotation reflects a specified grade, delivery point, quantity and date. Your intercompany sale may differ on all of those, and on payment terms as well. Where the differences are identifiable and can be quantified from market data, a quoted price plus documented adjustments is a strong analysis. Where the product is a specialised grade with no observable market, the quotation is a starting point rather than an answer. Write down the quotation source, the date convention used and every adjustment, because an unexplained difference from a public price attracts questions.
Why did our adviser choose a margin method over CUP?
Usually because the comparables available were not close enough. The comparable uncontrolled price method is the most direct one, but it demands a transaction genuinely like yours, and where the adjustments needed to bridge the differences grow large the answer becomes an artefact of those adjustments. Reliability then moves to a method that compares margins instead. That is a defensible reason, and it should appear in the file as a reason rather than as an omission. What is not defensible is a study that never mentions the most direct method at all, because the first question in any review is why the obvious comparison was not made.
Do we have to consider CUP even if we cannot use it?
Consider it, yes, and record the consideration. Method selection is part of the analysis, not a preliminary to it, and a file that states a conclusion without showing that the alternatives were weighed has a hole in the middle of it. The useful version is short: here is what a comparable would have to look like for this transaction, here is what we searched, here is what we found or failed to find, and here is why reliability sits with another method. Written at the time, that is a paragraph. Reconstructed under examination, it is an argument you are having on somebody else's terms.
Do we need transfer pricing documentation for a small group?
The obligation follows the existence of cross-border transactions with related parties, not the size of the group — which surprises founders with one foreign subsidiary and a management fee. Size affects which report is required: a local file, a master file, a country-by-country report. In Canada the practical trigger is timing, because documentation prepared by the filing due date is what stands between an adjustment and a penalty on top of it. See contemporaneous documentation in Canada.
What is OECD Pillar Two?
A global minimum effective tax for large multinational groups, delivered through top-up taxes rather than a single global rate. Where a group's effective rate in a jurisdiction falls below the agreed minimum, the shortfall is collected — by the parent jurisdiction under the income inclusion rule, by the source jurisdiction under a domestic top-up, or as a backstop by other jurisdictions. Canada has enacted implementing legislation. The compliance burden is data, long before it is tax. See BEPS and Pillar Two.
