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Today’s OECD Consultation Document on Amount B of Pillar One

The OECD published a consultation document on Amount B of Pillar One today. 
 
It describes the broad operation of Amount B and seeks public input on a large number of aspects of the proposed rules. The consultation runs until January 25, 2023, and the OECD is aiming to release the final Amount B rules by mid-2023.
 
What is Amount B?
 
Amount B is effectively a transfer pricing simplification that applies to the pricing of in-country baseline marketing and distribution activities.
 
Marketing and distribution arrangements between connected parties are a thorny issue for both tax authorities and taxpayers and they raise a number of potential issues.
 
This includes determining whether they are ‘base-line’ arrangements or not, the most appropriate transfer pricing method, and the identification of suitable comparables. In addition in certain  jurisdictions there may be a lack of appropriate local market comparables to determine the arm’s length price. 
 
Amount B aims to provide a basis to establish an arm’s length price irrespective of the location of the parties. 
 
Scope of Amount B
 
Amount B would apply to the following intra-group transactions:
 
  • Buy-sell arrangements where a party purchases goods from associated enterprises resident in other jurisdictions for wholesale distribution to unrelated parties primarily in its local market; and
  • Sales agency and commissionaire arrangements where a party contributes to the wholesale distribution of goods for a related party, and they exhibit economically relevant characteristics similar to those outlined in the scoping criteria for Amount B. 
 
Where a transaction falls into either of these categories the scoping criteria need to be reviewed to determine if the transaction is within the scope of Amount B.
 
Scoping criteria
 
Article 3.1 of the Consultation document provides for the following scoping criteria:
 

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Lee Hadnum

Lee is a qualified Chartered Accountant and Chartered Tax Adviser. A former Senior Tax Analyst at Bloomberg Tax, Lee began his career in Ernst & Young's Entrepreneurial Services department and has 20 years of international tax planning experience. Lee's books have been recommended by The Times, The Guardian and The Telegraph.

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