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    Simplified and Streamlined Approach – Pillar One Amount B

    The new Pillar One Amount B framework published by the OECD can be a lot to take in! Let us take the time together to have a look at what it entails and that means for the industry.

    The OECD inclusive Framework published its final guidance on the optional simplified and streamlined approach to baseline distribution activities (hereafter: simplified approach), also known as Pillar One Amount B, on 19 February 2024. The simplified approach aims to provide tax certainty and ease compliance burdens, especially for low-capacity jurisdictions, by setting fixed returns for in-scope baseline marketing and distribution activities.

    Where Pillar One Amount A and Pillar Two only apply to large MNE groups, Pillar One Amount B can also affect small MNE groups. Pillar One Amount B is therefore relevant for many MNE groups that are involved in baseline marketing and distribution activities.

    The OECD report provides information about the application, transactions in scope, determination of the return and the elimination of double taxation amongst other things. In this blog we set out the key highlights and a summary of the report.


    • The simplified approach will be incorporated in the OECD TP Guidelines as an Annex to Chapter IV.
    • Under the simplified approach, more emphasis is put on the operating assets of the distributor compared to the traditional determination of arm’s length returns for distribution activities.
    • The outcome determined under the simplified and streamlined approach by a jurisdiction that has chosen to apply this approach is non-binding on the counterparty jurisdiction.
    • Members of the Inclusive Framework commit to respect outcomes determined under the simplified and streamlined approach by low-capacity jurisdictions. A list of the low-capacity jurisdictions will be published by the OECD.
    • Depending on local country implementation, the simplified approach can be applicable for fiscal years commencing on or after 1 January 2025.


    Administering transfer pricing disputes related to baseline marketing and distribution arrangements presents administrative hurdles for tax authorities. The objective of implementing a simplified method to approximate an arm’s length outcome is to improve compliance and prevent disputes.

    Considerations regarding the application

    Jurisdictions may adopt one of two options for applying the approach, determining which party can assert it.

    1. A jurisdiction can permit resident tested parties to elect to apply the approach.
    2. A jurisdiction can require the use of the approach in a prescriptive manner by its tax administration and resident tested parties.

    Regardless of the chosen option, consideration should be given to implications for the relief of double taxation, as outlined in relevant guidelines and sections.

    Transactions in scope

    Qualifying transactions:

    • Buy-sell marketing and distribution transactions where the distributor purchases goods from one or more associated enterprises for wholesale distribution to unrelated parties; and
    • Sales agency and commissionaire transactions where the sales agent or commissionaire contributes to one or more associated enterprises’ wholesale distribution of goods to unrelated parties.

    A qualifying transaction will still be out of scope if:

    • They involve the distribution of intangible goods, services, or the marketing, trading, or distribution of commodities.
    • The tested party engages in non-distribution activities alongside the qualifying transaction, unless the qualifying transaction can be effectively assessed separately.

    Application of the most appropriate method principle to in-scope transactions

    The TNMM is typically chosen as the most appropriate method for in-scope transactions under the simplified and streamlined approach.

    Determining the return under the simplified and streamlined approach

    The simplified and streamlined approach uses a pricing matrix to determine the arm’s length remuneration. To use the pricing matrix, entities need to assess their net operating asset intensity, their operating expenses intensity and their industry group. There is also an operating expense cross-check that can cause an adjustment to the return on sales. As a final step, the returns might be adjusted for qualifying jurisdictions based on the sovereign credit ratings to account for limited benchmarking data availability in the database used by the OECD.


    To assess whether transactions meet the scoping criteria and whether the approach is properly applied, documentation is essential. The documentation approach for the simplified and streamlined approach is built on the premise that the current content of the local file includes the items of information and documents which are relevant to examine the taxpayer’s position. When taxpayers apply the simplified approach for the first time, they should include in their documentation that they consent to apply the approach for a minimum of three years (unless the transactions are no longer in scope).

    Transitional issues

    The MNEs are free to restructure their distribution models as they see fit. This may cause transactions to fall in or out of scope of the simplified and streamlined approach. Tax authorities may adopt targeted measures for artificial restructurings to derive tax advantages from the application of the simplified and streamlined approach.

    Tax certainty and elimination of double taxation

    In cases where one or more jurisdictions relevant to the MAP have chosen not to apply or accept the simplified approach, the taxpayers should base their position on the OECD TP Guidelines and should not base their position on the simplified and streamlined approach. It is intended though that there will be a similar outcome, regardless of the application of the OECD TP Guidelines or the simplified approach.

    Furthermore, it is stated that all bilateral or multilateral APAs and MAPs, that were acquired before the adoption of the simplified and streamlined approach, would remain effective concerning the covered qualifying transactions.

    Anticipated next steps

    The Inclusive Framework is currently working on an additional optional qualitative scoping criterion that jurisdictions may choose to apply as an additional step to identify distributors performing non-baseline activities for the purpose of the simplified approach. The Inclusive Framework will conclude this work by 31 March 2024.

    Given the simplified approach could already come into effect for fiscal years starting on 1 January 2025, we would recommend taxpayers to already cross-check current transfer pricing policies with respect to baseline distribution activities for in-scope transactions against the simplified approach.