In this edition of Transfer Pricing Talks, we explore how Pillar One Amount B simplifies transfer pricing for global businesses.
Understanding Pillar One Amount B: Simplifying Global Tax Compliance
On 19 December 2024, the OECD/G20 Inclusive Framework on BEPS (“inclusive framework”) released two additional documents on Pillar One Amount B, including fact sheets and Pricing Automation tool. Pillar One Amount B (hereafter also referred to as “Amount B”) introduces a streamlined approach to transfer pricing for baseline marketing and distribution activities. This streamlined approach is potentially applicable to a large scope of multinational enterprises (“MNEs”), regardless of their size, as of 1 January 2025. Below, the key aspects and implications of this streamlined approach are highlighted.
What Is Pillar One Amount B?
Pillar One Amount B establishes a simplified framework for determining appropriate transfer pricing for baseline marketing and distribution activities within an MNE, focusing on routine functions. It includes a standardized return based on a pricing matrix derived from a global dataset of comparables. The key objective is to reduce complexity, foster consistency, and minimize disputes in cross-border transactions.
The inclusive framework’s report from February 2024 outlines the main rules for applying Amount B, with supplementary guidance published in June 2024.
Pricing Automation Tool
To support compliance, the OECD launched a tool that automates the calculation of Amount B returns with minimal data input. Updated annually, this resource enhances efficiency and reduces administrative burdens for businesses and tax authorities.
The Pricing Automation Tool is useful for determining transfer pricing under Amount B. Taxpayers need to assess in advance whether intercompany transactions fall within the scope of Amount B.
The Dutch Implementation of Pillar One Amount B
The Netherlands has proactively adopted Pillar One Amount B, setting clear conditions for its application. In December 2024, the Dutch State Secretary of Finance issued a decree confirming the acceptance of this streamlined approach for intercompany transactions meeting certain strict conditions.
Key conditions include that the baseline marketing and distribution activities must be performed in a Covered Jurisdiction[1], adoption in the relevant jurisdictions’ domestic legislation, the existence of bilateral tax treaties. The decree applies to both intercompany transactions and profit allocations to permanent establishments, excluding transactions conducted entirely within the Netherlands.
[1] The list of Covered Jurisdictions is included in the June 2024 guidance and will be reviewed periodically.
Need Help Preparing for Pillar One Amount B?
The introduction of Pillar One Amount B represents a significant step toward a more streamlined approach in determining transfer prices. The effect to MNEs is however dependent on the implementation by different jurisdictions.
Our experts are here to assist with tailored advice and practical support. Contact us today to ensure your organization is ready for these transformative changes!
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