OECD Pillar One: Amount B documents published

The inclusive framework’s report of February 2024 (“Amount B report”) set out the core rules for Amount B, with supplementary guidance published in June 2024.

The newly published documents include an Amount B factsheet which provides a high-level overview of the mechanics of Amount B, including the steps businesses and tax authorities should take to implement Amount B, and a pricing automation tool designed to automatically compute the Amount B return for an in-scope tested party, based on the data input.

The inclusive framework has developed the Amount B approach to simplify and streamline the application of the arm’s length principle to in-scope baseline marketing and distribution activities. The approach sets out scoping criteria, pricing methodology, documentation, and tax certainty considerations relating to Amount B.

Amount B factsheet

The factsheet provides a high-level overview of the core rules for Amount B as set out in the Amount B report, including:

Step 1—Scoping

Identify qualifying transactions and assess whether they meet the Amount B defined qualitative and quantitative scoping criteria.

Step 2—Pricing

Determine the arm’s length return on sales for in-scope transactions using a three-step pricing framework:

• Pricing matrix: Identify the relevant industry grouping and factor intensity to determine a baseline return on sales range;
• Operating expense cross-check: Corroborate the return on sales derived from the pricing matrix by comparing it to operating expenses. Adjustments are made if the return falls outside predefined cap-and-collar ranges; and
• Data availability mechanism: Apply upward adjustments to the return on sales where there is insufficient data and the jurisdiction is considered “higher risk.”

Amount B pricing automation tool

The pricing automation tool has been developed by the inclusive framework to automate the calculations of the return on sales of qualifying transactions. The tool automatically computes the return based on data inputs from local financial statements, including calculation under the basic matrix and any adjustments needed under the operating expenses cross-check and data availability mechanism.

The pricing automation tool is an Excel spreadsheet and consists of a number of tabs, including:

• Inputs for scoping: Businesses input financial information and the spreadsheet indicates whether the scoping criteria are met. If the criteria are not met, businesses cannot apply the Amount B approach;
• Inputs for pricing: Businesses input further information (e.g., in respect of industry grouping) and the spreadsheet provides a return on sales percentage; and
• Automated calculations: The final tab provides details of each step of the return on sales percentage calculation.

Next steps

The OECD will hold a technical webinar on 11 February 2025 on the latest developments relating to Amount B, including a demonstration of the pricing automation tool.

Jurisdictions can apply Amount B to in-scope transactions for accounting periods beginning on or after 1 January 2025.

Deloitte comments

The OECD has supplemented existing information on the simplified transfer pricing approach for in-scope distribution activities with a high-level step-by-step guide to the Amount B approach and a useful automation tool (spreadsheet) which calculates pricing outcomes. The factsheet and automation tool cover (i) scoping, (ii) pricing under the basic return on sales matrix, (iii) adjustments under the cap-and-collar mechanism where operating expenses are disproportionate to sales margins, and (iv) further adjustments for developing countries that have limited comparable data and low sovereign risk ratings. The new publications do not make any changes or clarifications to the Amount B approach previously agreed, and sit alongside existing guidance.

To determine in-scope distributors, groups will apply basic transfer pricing principles. Distributors will need to buy and sell goods wholesale, or be a commissionaire or sales agent for the sales of goods, and will need to be capable of being priced using a one-sided transfer pricing method, combined with defined quantitative factors. Jurisdictions can choose to apply additional qualitative factors, reducing the simplicity benefits.

The ongoing question is how and when Amount B will be implemented by jurisdictions. Inclusive framework jurisdictions have committed to respect the outcome of Amount B where it is adopted by low-capacity jurisdictions, including in resolving disputes. The OECD proposal is that jurisdictions can adopt Amount B either as mandatory for in-scope distributors in their jurisdiction, or as an option that businesses can elect to use.

On 18 December 2024 the US published a Treasury Notice implementing Amount B (Notice 2025-04). The notice specifies that Amount B will be introduced for in-scope distributors, including US distributors, with effect from 1 January 2025 if businesses elect to use it. The notice seeks input from businesses on the implementation, including on whether Amount B should be mandatory in the US, with comments invited by 7 March 2025. It also stipulates that further regulations will be issued to address the US implementation of Amount B, including updating for any further developments at the OECD level.

Not all jurisdictions in the inclusive framework have expressed alignment with the principles and simplified approach of Amount B. India, for example, made a number of reservations against the Amount B approach. Australia and New Zealand have expressed views that they will not introduce Amount B for local distributors.

Some jurisdictions, including some in the European Union such as Ireland and the Netherlands, have so far introduced Amount B in order to satisfy the political commitment to support developing countries’ implementation. The UK government expressed its general support for Amount B in the Corporate Tax Roadmap published in October 2024 saying that it hoped that “the small number of jurisdictions with remaining issues on the Amount B framework can urgently resolve those issues to allow this historic agreement to be delivered.” Many jurisdictions have yet to state their intentions with regard to implementation, but in line with the UK government comments, it is expected that many will choose to implement Amount B to apply to distribution activities in their jurisdiction.

The OECD will maintain a list of jurisdictions that have officially confirmed that they will adopt Amount B, including the date of adoption. This list will be published on the OECD website and updated regularly as jurisdictions make formal announcements. Businesses will need to continue to monitor implementation by jurisdictions and adapt their approaches to distribution pricing accordingly. If jurisdictions choose not to implement Amount B, normal arm’s length pricing assessments and benchmarking will be required.

The Amount B approach and the automation tool focus on outcomes for pricing. Businesses in scope will want to think about how best to use the approach to set prices, including reliable forecasting of sales and operating expenses and monitoring the need for in-year adjustments, in order to minimize the need for year-end adjustments.