OECD publication on optional simplified rules applicable to distribution and marketing activities as of 1 January 2025

On 19 February 2024, OECD published the final report on a simplified approach available for baseline marketing and distribution activities (earlier known as Pillar One Amount B approach in OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations)

According to the report, the amount B approach is designed to simplify and streamline the application of the arm’s-length principle to “baseline marketing and distribution activities”

The report follows up on information from low-capacity OECD countries that 30% to 70% of their transfer pricing disputes are about baseline marketing and distribution activities.

The report lays down clear and simple rules optionally applicable to such activities, thus enabling OECD jurisdictions to secure some basic revenue levels while providing added assurance and a simpler reporting format for multinationals.

In accordance with the report, reliance is to be placed on a simplified pricing matrix and efforts should be made to follow a standardized approach to transfer pricing for associated distributors engaged in baseline marketing and distribution activities. The changes will affect primarily distributors who (1) buy goods from related parties for resale on the target market and (2) have a functional profile that is described as simple and routine.

Jurisdictions can choose to apply the simplified and streamlined approach for fiscal years commencing on or after 1 January 2025.

The report is attached to and part of OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, with corresponding changes having been made to the Commentary on Article 25 of the OECD Model Tax Convention on Income and on Capital.

Among the revisions to the commentary is a requirement for countries and taxpayers to follow and comply with certain guidelines from the Amount B Report, where relevant for matters dealt with pursuant to MAP or the related arbitration.

If this issue pertains to your business and you are interested in our assistance, please contact us.

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