OECD Amount B – what does the new mechanism mean for businesses?

The Organisation for Economic Co-operation and Development (OECD) plays a pivotal role in shaping the global tax landscape, particularly in the context of the digital economy. Its objective is to establish a more equitable and predictable international tax framework that addresses the challenges posed by globalization and the operations of multinational enterprises. In response to the growing number of unilateral tax measures adopted by individual countries, the OECD/G20 Inclusive Framework on BEPS has developed the so-called Two-Pillar Solution for international taxation.

This approach comprises two complementary mechanisms. Pillar One focuses on a new allocation of taxing rights over the profits of the largest multinational corporations, reflected in Amount A. Amount A represents a new way of allocating a portion of profits to countries where consumers are located.

Amount B, the second component of Pillar One, seeks to simplify and standardize the tax treatment of baseline marketing and distribution activities, particularly for entities performing routine sales functions in local markets. The goal is to introduce predefined, streamlined remuneration rules for such entities, with a view to reducing tax disputes, enhancing transparency, and increasing certainty for both tax authorities and taxpayers.

What is Amount B?

Amount B is a simplified mechanism for establishing arm’s length remuneration for entities engaged in baseline distribution activities. The concept is grounded in the application of fixed, market-aligned returns (margins) for distributors, provided that they perform limited-risk, routine sales functions without assuming significant risks or strategic roles within the group.

Amount B has been designed with low-capacity jurisdictions in mind—primarily developing countries with limited administrative and technical resources for overseeing transfer pricing matters. In many of these jurisdictions, conducting detailed benchmarking studies and assessing the arm’s length nature of intra-group transactions poses a significant challenge. This is often due to both a lack of access to reliable market data and a shortage of specialized personnel. By introducing simplified and standardized transfer pricing rules under Amount B, the OECD aims to support these jurisdictions in more effectively enforcing transfer pricing regulations, while at the same time reducing the complexity and cost of compliance and administration.

Transactions covered by the mechanism

In order to apply the simplified approach to transfer pricing in practice, certain conditions outlined in the Amount B report must be met. Only transactions that align with specifically defined criteria—both in terms of the functions performed by the parties and their economic profile—are eligible for the simplified framework.

The new OECD mechanism is targeted at entities performing basic distribution and marketing functions, without engaging in more complex or higher-risk activities such as manufacturing or research and development.

As a general rule, Amount B is intended for wholesale distributors that carry out routine distribution activities—namely, purchasing goods from related parties and reselling them on the wholesale market. The mechanism can also be applied by sales agents and commissionaires who facilitate the sale of goods from related entities to third parties.

It is important to note that although Amount B is primarily designed for wholesale distribution businesses, it may also be available to mixed wholesale-retail distributors. However, to qualify, such entities must ensure that revenue derived from retail activities does not exceed 20% of their total distribution revenues over the last three years. This threshold is a key safeguard intended to exclude entities performing more complex functions, such as those associated with higher-risk and value-added retail operations.

In addition to meeting functional and structural criteria, the transaction must exhibit economic characteristics that allow for pricing under a one-sided transfer pricing method. In most cases, as indicated in the Amount B report, the appropriate method will be the transactional net margin method (TNMM). In certain limited cases, where the facts and circumstances allow, the comparable uncontrolled price (CUP) method may also be acceptable.

Who is excluded from applying Amount B?

Amount B will not be applicable to all types of business activities. According to the framework developed by the OECD, transactions meeting certain characteristics may nonetheless be excluded from the simplified mechanism in several key scenarios.

First and foremost, Amount B does not apply to the distribution of intangible goods and services. This includes, for example, digital goods and services, which due to their inherent complexity require a more nuanced approach to transfer pricing. In addition, transactions involving the marketing, trading, or distribution of natural resources—whether in raw or processed form—are expressly excluded from the simplified regime.

Another key exclusion applies to transactions where the distributor is engaged in non-distribution activities. Even if other qualification criteria are met, such transactions will be ineligible for Amount B unless the qualifying distribution transaction can be clearly delineated and separately priced. Examples of non-distribution activities include manufacturing, research and development, government contracting, and financial services. These types of functions typically introduce greater operational complexity and risk, making traditional transfer pricing methods more appropriate.

Furthermore, even where a transaction appears to meet the functional and transactional criteria on the surface, it may still be excluded if it fails to meet certain economic thresholds. For instance, if the tested party incurs annual operating expenses that are either below 3% or exceed 20–30% of net annual revenues, the transaction will fall outside the scope of the simplified approach.

In summary, the OECD’s new mechanism is strictly limited to low-risk, routine transactions that can be reliably priced using a one-sided transfer pricing method. Where complexity, risk, or deviation from standard financial parameters arises, Amount B will not be applicable.

Benefits and challenges for businesses

The introduction of Amount B brings a range of potential benefits for businesses, particularly those operating within international corporate groups. Chief among these is the simplified mechanism for determining remuneration for routine distribution transactions, which offers a more straightforward and predictable approach to transfer pricing compliance. The OECD’s proposed tax framework aims to standardize practices and reduce the need for detailed benchmarking analyses—ultimately lowering compliance costs and relieving pressure on companies’ finance and legal departments.

Another significant advantage lies in the increased legal certainty and stability the mechanism provides, especially in the cross-border context. Amount B offers businesses a clear and consistent method for setting arm’s length remuneration for local distributors, thereby minimizing the risk of interpretational discrepancies across jurisdictions. In practice, this translates to reduced exposure to tax adjustments and disputes with tax authorities, which are often resource-intensive and time-consuming for taxpayers.

Developing countries—so-called low-capacity jurisdictions—stand to benefit in particular from the adoption of Amount B. These jurisdictions often face constraints in terms of administrative capacity and access to transfer pricing tools. By streamlining formal procedures and introducing clearly defined rules, the new framework enhances the ability of tax administrations in these regions to oversee and enforce transfer pricing compliance effectively. It allows for the practical implementation of OECD transfer pricing standards without the need for extensive financial or administrative resources.

Implementation of Amount B – timelines and practical challenges

The decision to implement Amount B has been left to individual jurisdictions, which may choose to adopt it either as a mandatory requirement or as an optional regime available to qualifying taxpayers. Under a voluntary approach, taxpayers may opt into the simplified mechanism provided they meet the eligibility criteria. Conversely, under a mandatory model, both taxpayers and tax administrations will be required to apply Amount B to qualifying transactions. Regardless of the chosen model, Amount B may be applied for fiscal years beginning on or after January 1, 2025.

At this stage, the OECD has not yet published an official list of member states that have committed to implementing Amount B. Implementation is progressing at different speeds across jurisdictions, with many countries still evaluating the legal and practical implications of adopting the new framework.

Some jurisdictions, such as the United States, have already formally confirmed their adoption. The U.S. has announced that it will implement Amount B from January 1, 2025, applying it to qualifying transactions within the boundaries set by the OECD. On the other hand, countries like the Netherlands and Norway have indicated that they do not intend to implement Amount B within their domestic legal frameworks. However, both countries have stated that they are willing to respect outcomes derived from the application of Amount B in other jurisdictions.

Similarly, the Polish Ministry of Finance and tax administration have confirmed that Poland does not plan to implement Amount B domestically, though it will acknowledge and accept the outcomes of its application by other countries.

As work progresses on the implementation of Amount B, taxpayers are awaiting the publication of an official list of jurisdictions that will adopt the simplified mechanism. However, at this stage, significant uncertainties remain.

One of the key concerns is how to address situations where the profitability resulting from the application of the Amount B matrix significantly diverges from internal benchmarks or the actual profitability of group distributors. In such cases, will an adjustment to profitability be required? If so, on what legal basis and through what mechanism?

Further complexities may arise within multinational groups operating across jurisdictions with differing positions on Amount B. In such cases, will it be possible to apply a consistent pricing policy across the group, or will companies need to maintain parallel models—one aligned with jurisdictions implementing Amount B, and another for the rest?

Summary and recommendations for businesses

Although it remains uncertain which jurisdictions will ultimately adopt Amount B—and whether it will be implemented on a mandatory or elective basis—it is advisable for businesses to begin assessing whether the mechanism may apply to their operations. For many groups, Amount B could present a valuable opportunity to simplify transfer pricing compliance and reduce tax risk exposure.

At this stage, it is particularly important to closely monitor developments regarding the implementation plans of individual countries. The scope and applicability of Amount B in practice will depend directly on which jurisdictions choose to implement the regime and in what form. Simultaneously, companies may benefit from conducting a preliminary review of intra-group transactions to evaluate their potential alignment with the conditions outlined under the Amount B framework. Such an assessment can provide insight into whether a business may qualify for the simplified approach in the future and help determine whether adoption would deliver meaningful operational or tax benefits.

To accurately assess which transactions or business profiles may be eligible for Amount B, companies should consider performing a targeted analysis. This analysis should identify transactions that meet the OECD’s eligibility criteria and help evaluate the potential benefits and challenges of implementing the simplified regime. Taking a proactive approach at this early stage will allow businesses to prepare for upcoming regulatory changes, reducing the risk of uncertainty and avoiding unnecessary compliance costs stemming from a lack of preparation.

If you have any questions regarding the practical application of Amount B or would like assistance in evaluating its suitability for your group, we encourage you to reach out to our team of experts. We have extensive experience supporting international clients, including Polish-headquartered multinationals, as they expand into global markets. In collaboration with our network of partners across multiple jurisdictions, we are well-positioned to help you assess the feasibility and value of adopting Amount B—and to support you throughout its implementation and calculation.

For #MORE information about how we can support you, please visit the MDDP Transfer Pricing page: https://www.mddp.pl/transfer-pricing/