OECD Published Guidance on Amount B


On 19 February 2024, the OECD published a report which aims to simplify and streamline the application of the arm’s length principle to in-country baseline marketing and distribution activities (the Report) (also known as Amount B under Pillar One). The first draft guidance and call for input dates back from late 2020. Quite some time has lapsed since then which shows that considerable effort went into the project so far by the OECD. The guidance targets all companies and particularly accommodates the needs of low-capacity jurisdictions (LCJ). A list of LCJ will be developed by 31 March 2024. Amount B is considered to serve as a fair approximation of an arm’s length outcome.  Together with the Report, the OECD published a reader’s guide.

The Report will be inserted as an annex to Chapter IV (Administrative approaches to avoiding and resolving transfer pricing disputes) of the OECD Transfer Pricing Guidelines (OECD TPG) and is rooted in Chapters I-III of said guidance.  The Report creates the possibility that the arm’s length result for baseline marketing and distribution is determined on the basis of a fixed return, drawing from the general principles of the OECD TPG and taking into account the industry grouping to which the taxpayer belongs and based on certain quantitative ratios.  Important to note already is that if a jurisdiction involved in a transaction does not apply or adhere to Amount B the guidance in the other parts of the OECD TPG takes priority.

The Inclusive Framework (IF) is still working on an additional optional (for countries) qualitative scoping criterion. The IF will conclude this work by 31 March 2024.  The Report states that its content, including any design elements, should be considered without prejudice to any future work on Amount B, such as on the interdependence of Amount B with the signing and entry into force of the multilateral convention MLC.

Amount B can be applied for in-scope transactions for fiscal years commencing on or after 1 January 2025.

India made several reservations on the Report, watering down the eventual reach and potential use of the guidance. 

In more detail

Amount B is an optional system

Jurisdictions have three options regarding Amount B:

  • Not introduce Amount B in the legal or administrative system; or 
  • Allow in-scope taxpayers to apply Amount B (safe harbour approach); or
  • Introduce a mandatory use of Amount B for in-scope taxpayers.  

It is not clear from the Report whether in case of the mandatory use of Amount B an in-scope taxpayer has the right to rebut the outcome under Amount B and justify its pricing based on the OECD TPG other than the guidance on Amount B.  

The Report indicates that IF-Members should respect the outcome of Amount B where it is applied by a LCJ and to take all reasonable steps to relieve potential double taxation that may arise from its application upon condition a bilateral tax treaty is in effect.

The list of countries that apply Amount B, as well as countries that can be considered LCJ, will be published on the OECD website.

Amount B applies to certain types of low-risk marketing and distribution activities

Subject to the option that a certain jurisdiction has chosen, Amount B is or can be applied to

  • Buy-sell marketing and distribution activities for wholesale distribution of tangible goods (hence excluding non-tangible goods, services and commodities) to unrelated parties. De minimis retail sales are allowed if they do not exceed 20% based on the three-year average (see below); 
  • Sales agency and commissionaire transactions,

if such activities can be reliably priced using a one-sided method (TNMM) and the operating expenses fall within a range of  3% and 20% (or 30%, depending on the choice of the jurisdiction) of the annual net revenues of the distributor as the tested party, based on a three year weighted average of the concerned enterprise.

When a taxpayer performs both marketing and distribution activities as indicated above as well as other activities that do not qualify for Amount B, such other activities should be appropriately segregated from the qualifying activities. If this is not possible, the taxpayer will not qualify for Amount B hence an implicit call for a proactive assessment by companies of how activities are processed accounting wise.

Amount B starts from the accurate delineation of the transaction, combined with quantitative ratios

The calculations for the scoping ratios are in principle performed on the data of the three prior years immediately preceding the year under analysis. 

The Amount B mechanism, which is primarily based on the application of a fixed return on sales ratio (ROS) for the year concerned, contains several steps:

Step 1: Determine the relevant industry grouping in which the taxpayer belongs; the report identifies three groupings based on wide industry sector categories with a lower, middle or higher profitability.  If the products distributed fall into more than one category, the proportion of sales of each grouping should be calculated.  If less than 20% of sales fall  into a different grouping, only the majority of sales will be considered.

Step 2: Determine the relevant factor intensity classification; 

a) Calculate the accounts payable guardrail – for the purpose of calculating the net operating assets for the relevant years and mitigating the risk of distortive credit terms, an accounts payable days guardrail of max 90 days  applies.

(Creditors / cost of goods sold) * 365 ≤ 90

When the accounts payable days exceeds 90 days, the creditors should be adjusted:

(cost of goods sold / 365) * 90 

b) Calculate the Net operating assets intensity ratio:  

(fixed tangible assets, fixed intangible assets + working capital) to Sales 

Working capital = stock + debtors – creditors (possibly adjusted under a))

c) Calculate the Operating expenses to Sales Ratio 


As the case may be, one should not overlook to consider the possible de minimis test on retail sales (max 20%) as well.

Step 3: Determine the ROS from the range from the pricing matrix from the combination of the industry grouping and factor intensity (bandwidth of + 0.5%)

Step 4: Determine the operating expense cross check (cap & collar range) which is the return on operating expenses. When the ROS produces a result outside the Operating Cap (varying from 40 – 70% (45 – 80% for LCJ) depending on factor intensity classification ) and Collar range (10%), upward or downward adjustments to the ROS should be made 

  1. Return on opex exceeds the cap: downward adjustment of ROS to meet the cap;
  2. Return on opex is below the collar: upward adjustment of ROS to meet the collar

Additional step for LCJ

The ROS as determined above is increased for a net risk adjustment based on the rating of the LCJ.

Review of matrices and data

The data used in determining the matrices mentioned above is based on a global dataset of companies engaged in baseline marketing and distribution and will be reviewed every 5 years unless market conditions necessitate an earlier update. 

The adjustment based on a modified pricing matrix for jurisdictions that could use their own  local dataset (discussed in the Public consultation document on Amount B of Pillar One of 17 July 2023) was left out of the Report.

PwC Belgium developed a specific tool  

PwC Belgium developed a specific tool for calculating the appropriate Amount B return.  More information on the tool can also be found here.


The Report refers to the three tiered approach (master file, local file and country-by-country reporting) discussed in Chapter V OECD TPG. The Report indicates that the local file may be particularly relevant and useful to determine whether the scoping criteria and pricing methodology were followed, such as:

  • Information on the accurate delineation of the qualifying transaction (including functional analysis of the taxpayer and relevant associated enterprises with respect to the in-scope transactions, and the context in which such transactions take place);
  • Written contractual arrangements of the in-scope transaction; 
  • Calculations demonstrating the relevant revenue, costs and assets allocated or attributed to the in-scope transaction;
  • Information and allocation schedules showing how the financial data used in assessing the applicability Amount B and how it ties to the annual financial statements.

Tax certainty, dispute avoidance and resolution

Finally the Report discusses the traditional remedies to avoid or resolve double taxation:

  • Unilateral remedies under domestic law;
  • Application of Article 9(2) OECD Model Tax Convention (OECD MTC))
  • Application of the Mutual Agreement Procedure (MAP) (Article 25  OECD MTC))
  • Arbitration if provided in the relevant double tax treaty (or by extension other instruments such as the European Arbitration Convention or the dispute resolution directive).

The Report indicates that in a MAP or arbitration procedure, where at least one jurisdiction has opted not to apply or accept Amount B, the competent authorities of the jurisdictions must justify their positions based only on the guidance of the OECD TPG, excluding the guidance on Amount B.

Work will be done in 2024 on competent authority agreements on Amount B. Further, the IF Members commit to respect the results under Amount B where it is applied by an LCJ and takes all reasonable steps to relieve double taxation from the Amount B application by an LCJ when there is a double tax treaty in place. Working Party 1 has been charged in that respect to develop the appropriate commentaries to be inserted in the next update of the OECD MTC.However, the limited treaty network that LCJ have could hamper the resolution of double taxation and the conclusion of competent authority agreements.


The aim of Amount B is to create a simplified and streamlined approach for relatively straightforward and low risk marketing and distribution transactions. In principle, a simplified and streamlined approach for such  activities  should be welcomed. Notwithstanding the efforts put into the project by the OECD so far ,the question is whether the guidance on Amount B reaches the proposed goals. It underscores the challenges to obtain buy-in from a diverse set of countries

Taxpayers that are eligible to be in scope of Amount B should be aware of the following. 

  • Chances  of Amount B being globally embraced are anything but straightforward.  Different jurisdictions may opt for different approaches ranging from the non-application of Amount B to its mandatory use. In case of mismatch between the options chosen by different jurisdictions, Amount B will not be applicable and you must rely on the OECD TPG other than the guidance on Amount B. The Report does not seem to contain a way forward to reach global application (or at least an application as broad as possible) of Amount B.
  • Actual delineation is key and as the Amount B guidance is fully inspired by the OECD TPG,  even a rigorous application of the control over risk framework may not automatically lead to an unambiguous confirmation of the appropriateness of a one-sided method. Examples in the Amount B guidance are regulatory licenses, design and control of marketing programmes etc. This concern will even be amplified should the guidance on qualitative scoping (as expected by the end of March) be overly onerous.
  • The additional guidance on qualitative scoping is expected to heavily affect the position of countries vis-à-vis the application of Amount B. Even far-reaching is that for example India’s buy-in to  the Amount B guidance depends on said guidance so the project did not come to a landing yet.
  • The parallel application of Amount B (possibly a mandatory application in certain jurisdictions) and the other guidance of the OECD TPG in other jurisdictions may lead to double (or multiple) taxation. Double taxation should be resolved through the application of the guidance of the OECD TPG other than the guidance on Amount B. This tie-breaker enhances tax certainty, but at the same time reduces the value of the Amount B approach. 
  • It might be good to consider calculating the arm’s length result both inside and outside the Amount B approach if the in-scope transaction is performed between jurisdictions adopting a different Amount B approach.
  • While the policy objective of empathizing with the needs of LCJs are understood, the percentages eventually applied (see above on the net risk adjustments) may come across as (overly) generous in particular circumstances and may create an impetus to consider centralized distribution structures by which local presences are avoided. That would go against the policy objective of Amount B altogether. 
  • The double taxation that taxpayers may face may only be resolved when the adequate instruments are in place, i.e. in most cases the existence of a double tax treaty (containing MAP and possible arbitration provisions)if no unilateral relief can be given. Unfortunately, the treaty network of LCJ is currently still less developed than the treaty networks of developed economies. Most treaties with LCJ do not have an arbitration mechanism to resolve any unresolved issues. The risk of unresolved double taxation is hence not reduced. 
  • Finally, the possibility that Amount B leads to a different application in different countries, may have a spill-over effect on other tax issues, for example issues related to Pillar Two (minimum effective tax rate of 15%).


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