On Feb. 19, 2024, the Organization for Economic Cooperation and Development (OECD) amended its transfer pricing guidelines to include “Amount B,” a standardized approach to determine the arm’s length remuneration for certain marketing and distribution activities. The updated guidelines apply for fiscal years beginning on or after Jan. 1, 2025. In December 2024, the OECD issued new tools to implement Amount B. The availability of the streamlined “Amount B” approach will vary by jurisdiction, as not every member of the OECD’s Inclusive Framework (IF) has adopted it. Thus, implementation and application may differ by jurisdiction. 

Amount B’s Simplified and Streamlined Approach

Multinational companies often have numerous intercompany transactions. To comply with the arm’s length principle, these transactions must be priced in a way that reflects the remuneration that third-party companies would pay for a similar transaction. Determining such remuneration is accomplished by benchmarking the amount that would be paid by unrelated parties against the amount paid in the related-party, intercompany transaction. Performing a benchmarking study and applying the results to determine the correct remuneration can be time consuming for both taxpayers and tax authorities. This is especially true in jurisdictions in which tax authorities have low capacity and sometimes lack the necessary expertise. The OECD has noted that several low-capacity jurisdictions have reported that between 30% and 70% of their transfer pricing disputes relate to baseline marketing and distribution activities.

The OECD's Pillar One Amount B, also known as the “simplified and streamlined approach,” is its response to the call for changes to its transfer pricing guidelines to address the challenges of benchmarking and complying with the arm’s length standard. In creating the SSA, the OECD was particularly focused on the needs of low-capacity countries. The SSA provides a standard pricing method to determine the remuneration for baseline marketing and distribution activities.

The SSA seeks to enhance tax certainty while reducing administrative costs and the risk of disputes. Added as an annex to Chapter IV of the OECD transfer pricing guidelines, countries have the option to apply Amount B’s SSA to fiscal years beginning on or after Jan. 1, 2025. Depending on the specific jurisdiction’s approach to Amount B implementation, taxpayers may have the option or the obligation to apply the SSA. The standardization is intended to benefit both taxpayers and tax authorities simultaneously by clarifying and simplifying related party pricing.

Applying the SSA

The OECD’s Amount B initiative aims to simplify the arm’s length pricing principle for certain specified activities. Depending on the implementation, it may also create more certainty as the calculated remuneration may be binding for tax authorities in jurisdictions that adopted or accepted the SSA. The approach contrasts with traditional benchmarking, which requires a detailed, case-by-case analysis to identify comparable transactions and determine appropriate pricing. By offering a streamlined approach, Amount B seeks to reduce complexity and enhance tax certainty for qualifying transactions. Below, we have set forth considerations in determining whether to apply the SSA.

Do the Jurisdictions Involved Accept the SSA as a Method to Determine Remuneration?

The OECD’s transfer pricing guidelines are “soft law,” and not every member of the OECD’s inclusive framework (IF) has adopted or will adopt Amount B. Even if adopted, not every jurisdiction will take the same approach. Due to its soft law status, the SSA must be implemented in country-specific legislation to take effect. Some jurisdictions have already voiced their intent to implement the SSA and are considering whether the SSA should be optional or mandatory, while others have stated they will not implement it. In some cases, jurisdictions that have opted not to implement the SSA have stated they will nonetheless accept the determined remuneration (subject to conditions). Depending on how the SSA is implemented in the jurisdictions involved in an intragroup transaction, it may function as a safe harbor for taxpayers in several ways:
 

Is the Transaction in the SSA’s Scope?

The SSA applies to two types of transactions:
 

Transactions must meet additional scoping criteria to qualify for Amount B, including qualitative factors such as the ratio of operating expenses to net sales. Transactions involving the distribution of non-tangible goods, services, or commodities are specifically excluded from SSA’s scope.

Using the Tool to Apply the SSA

The OECD released a Pricing Automation Tool for the Simplified and Streamlined Approach (Tool) to apply the SSA. The Tool is designed to calculate the return for eligible transactions with minimal data input. The OECD will update it annually to incorporate changes in the pricing matrix and other relevant data points needed for SSA adjustments.

To determine the remuneration for transactions that are in the SSA’s scope, the Tool requires the following information from the stand-alone annual accounts of the company under review (tested party):
 

Based on the data provided, the Tool generates a “return on sales” percentage in the table in the “inputs for pricing” sheet. Subsequently, an “Operating Expense Cross-Check” is applied as a “guardrail.” Based on the tested party’s financial data, industry group, and jurisdiction, the Tool determines whether its return on operating expenses falls within an upper limit and a lower limit, which has been determined by the OECD (Cap-and-Collar range). The OECD deems a “return on operating expenses” outside the Cap-and-Collar range disruptive for its calculation of the “return on sales.” Therefore, if the return on operating expense exceeds the cap or falls below the collar, the percentage is brought in line with these percentages set by the OECD. An adjustment in the “return on operating expense” results in an adjusted “return on sales” percentage, and thereby the tested party’s profitability.

Varying Approaches and Implementation

United States

In December 2024, the U.S. Department of Treasury issued guidance indicating that the United States plans to propose regulations¹ that would allow U.S. companies to apply the Amount B SSA for tax years beginning after Jan. 1, 2025. Notice 2025-04 indicates that use of the SSA would not be mandatory but would be elective for taxpayers, functioning as a safe harbor for transactions where a party to an in-scope transaction is a U.S. taxpayer. The Notice requests comments by March 7, 2025, on several issues still under consideration, including whether the SSA should only apply in transactions with jurisdictions that have also implemented the SSA and if the IRS can apply the SSA when a taxpayer does not elect to do so.

The IRS intends that the proposed regulations would not substantively diverge from any aspect of the OECD Report. Before the IRS publishes the proposed regulations, U.S. taxpayers may rely on the SSA, as set forth in the report, for taxable years beginning Jan. 1, 2025.

Other Jurisdictions

Contrary to the United States, the Netherlands will not implement Amount B’s SSA. However, the Netherlands will respect its application in jurisdictions with which it has a double taxation treaty in place. The Dutch tax authorities will prevent double taxation through corresponding adjustments when companies correctly apply the SSA abroad. Australia and New Zealand, on the other hand, have already stated they will not implement Amount B’s SSA.

Globally, not many other jurisdictions have published their definitive stances on Amount B. Canada, Brazil, and the United Kingdom are still studying the opportunities and consulting stakeholders on the added value. Japanese businesses have expressed support for the Amount B objectives, but the government has not officially adopted Amount B into Japan’s transfer pricing regulations. Singapore’s tax authorities also have not released an official position on Pillar One and Amount B adoption.

Regardless of implementation based on domestic legislation, members of the IF pledged to take all reasonable measures to mitigate potential double taxation where bilateral tax treaties apply. The OECD Report also outlined a political commitment, agreed upon by all IF members, to respect an Amount B outcome that a covered jurisdiction applies. A jurisdiction can be considered a covered jurisdiction when it is part of one of the following three groups:
 

The OECD publishes a list of covered jurisdictions on its website, which will be reviewed every five years, and published the first version of the list in June 2024. 

Takeaways

• Amount B’s SSA is a simple way of pricing specific, routine intragroup transactions. The Tool significantly simplifies the pricing process.
   
• Although the SSA is now part of the OECD transfer pricing guidelines, not all members of the OECD’s IF have implemented the SSA in their national legislation.
   
• Jurisdictions may have issued guidance or decrees on how they will manage situations involving a taxpayer that is part of a group operating in a jurisdiction that applies the SSA.
   
• Depending on the implementation in local legislation, there may be different results: