This article deals with the first transfer pricing case to come before the courts in South Africa which deals with the transfer pricing provisions contained in the South African tax legislation. It has attracted much interest and attention from tax practitioners in South Africa. It relates to the determination of an arm’s length royalty in respect of intellectual property in the form of a trademark. After a consideration of various methods to be used in determining the arm’s length rate of the royalty, the court held that the comparable uncontrolled price method was the appropriate method to be used in the circumstances and that the appellant possessed a valid internal comparable. Accordingly, the court upheld the appeal of the taxpayer.