Starting in 2025, Amount B introduces standardized transfer pricing for routine marketing and distribution activities, focusing specifically on the sale of tangible goods by limited-risk distributors (LRDs) in B2B wholesale contexts.
Together with Amount A – reallocation of residual profits to market jurisdictions – Amount B is part of Pillar 1, the OECD initiative addressing tax challenges arising from the digitalization of the economy and global business operations. As the guidelines around Amount A are still under development, Amount A does not apply at this stage.
Navigating international taxation is challenging. At TPA Global, we help businesses implement Amount B to simplify compliance and reduce tax disputes.
Amount B significantly simplifies transfer pricing compliance by providing a standardized approach for routine distribution activities. This standardization reduces the time and resources needed for compliance, particularly beneficial for businesses operating across multiple jurisdictions.
The standardized nature of Amount B reduces the need for extensive transfer pricing documentation and complex economic analyses, leading to cost savings in compliance and consultation fees.
By adopting a standardized approach, Amount B helps minimize transfer pricing disputes and reduces the risk of double taxation. This provides greater certainty for businesses in their international operations and tax planning.
Amount B uses a standardized pricing matrix to streamline transfer pricing. Here’s how we can help:
1 Identify Your Business Type
We group your business into one of three categories:
Group 1: Perishable goods (e.g., groceries).
Group 2: Durable goods (e.g., electronics).
Group 3: Industrial equipment (e.g., machinery)
2 Calculate Profit Margins
3 Ensure Compliance
A simplified approach to transfer pricing for routine marketing and distribution activities
1 Distributor/sales agent is the “tested party” and the Transactional Net Margin Method is the appropriate transfer pricing method
2 OPEX/Sales ratio must not fall below 3% or exceed 20-30%
3Transactions involve tangible goods (not intangibles, services, or commodities)
4 Separate pricing for additional activities beyond baseline distribution
1 Identify relevant Industry Grouping based on the products distributed
2 Assessing the relevant Factor Intensity
3 Apply the Pricing Matrix to find the applicable Return on Sales (ROS) percentage (between 1.5% to 5.5%)*
* To see the full list of products in relevant grouping & the Pricing Matrix Table, download the detailed summary below
1 Verify the calculated return falls within reasonable limits
2 Apply “cap-and-collar” adjustments if needed
3 Cap rates vary by factor intensity (40% to 80%)*
4 Collar rate is 10% across all categories*
* To see the full details & steps of the operating expense cross-check, download the detailed summary below
1 For qualifying jurisdictions, apply the adjustment formula
2 Applies to covered jurisdictions (66 countries as of June 2024)
Download our comprehensive Amount B summary for complete calculation methodology, detailed pricing matrices, step-by-step implementation guidance, jurisdiction-specific considerations, and industry-specific applications.
Inclusive Framework (IF) members have committed to respect the outcomes determined under the Amount B approach when applied by “covered jurisdictions.”
This commitment includes taking reasonable steps to alleviate potential double taxation where bilateral tax treaties exist.
Our team can help you assess the impact of Amount B on your business and plan effectively. From classification to compliance, we ensure your operations are optimized for global tax changes. Let’s make Amount B work for you. Reach out to TPA Global today!
