Pillar 1 Amount B — Simplified Transfer Pricing for Baseline Distribution

Amount B is a supplementary element of Pillar 1, providing a simplified and standardised approach to pricing baseline marketing and distribution activities within multinational groups. The aim is to reduce significant compliance burdens and frequent disputes in transfer pricing for routine distribution functions, particularly in developing countries with limited transfer pricing administration capacity.

• Defines a pricing matrix by industry group and asset intensity for qualifying baseline distribution activities
• Based on the arm's length principle but significantly simplifies its application
• Optionally applicable; taxpayers may still conduct individual transfer pricing analyses
• Integrated into the OECD Transfer Pricing Guidelines (Chapter IV, Annex)
• Particularly aimed at developing countries to strengthen tax collection capacity

Amount B was developed in parallel with Amount A under the Pillar 1 project. Unlike Amount A, which creates entirely new taxing rights, Amount B streamlines the application of the existing arm's length principle. In February 2024, the OECD published the final report on Amount B, introducing it as a new annex to Chapter IV of the OECD Transfer Pricing Guidelines. Amount B therefore technically came into effect earlier than Amount A, as it does not require a multilateral convention but is directly integrated into existing guidelines.

In June 2024, the OECD/G20 Inclusive Framework on BEPS published supplementary guidance clarifying the optional nature of Amount B: countries may implement Amount B either as a mandatory safe harbour or as an optional simplification. This guidance also addressed specific implementation questions and facilitated domestic adoption.

Implementation by individual countries depends on their domestic adoption of the updated OECD Transfer Pricing Guidelines. Some countries have already incorporated Amount B into their national guidance, while others are still pending.

Amount B applies to intragroup distribution entities that sell goods to unrelated parties and that:

• Perform only baseline distribution functions (no significant risks or intangibles)
• Do not hold ownership interests in intangible assets material to the distribution activity
• Make no unique and valuable contributions to the value chain
• Are not active in sectors excluded from Amount B (e.g., commodities, financial services, purely digital distribution models)

Application is limited to distribution entities with a net revenue-to-operating expense ratio within defined ranges. Scope includes buy-sell distributors as well as agents and commissionnaires.

Per the June 2024 OECD guidance, individual jurisdictions may implement Amount B as a mandatory safe harbour or as an optional simplification measure. Taxpayers in jurisdictions that have not adopted Amount B cannot apply the standardised pricing matrix.

• Intragroup distribution entity performing exclusively baseline distribution functions
• No material ownership of intangible assets
• Revenue falling within defined industry groups per OECD classification
• Operating margin profile within the ranges of the OECD pricing matrix (tiered by industry group and asset intensity)
• Acceptance of the matrix-based standardised return by taxpayer and tax authority
• Annual review if material changes to business activities occur

1 correction:
- effective_date uses publication date instead of application start
2 updates:
- Missing key_date: Application start January 2025
- Missing key_date: June 2024 Inclusive Framework Guidance
7 clarifications.
4 notes.