Article
Amount b guidance gives taxpayers an option on qualifying transactions
March 18, 2024 · Authored by Sid Paruthi, Vernon Noronha, Ravi Ganapathy
A new report published by the Organization for Economic Cooperation and Development (OECD) will allow jurisdictions to opt into the simplified and streamlined approach to qualifying transactions provided by Amount B guidelines, effective Jan. 1, 2025.
The report on Amount b, a Pillar One initiative of the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS), known as the Inclusive Framework, was published Feb. 19, 2024.
The report’s goals are to:
- Reduce compliance burden for taxpayers pricing qualifying arrangements
- Prevent and efficiently resolve transfer pricing disputes, thereby improving tax certainty
- Alleviate administrative burden for tax administrations and taxpayers
Who is affected by OECD amount b guidance?
Taxpayers with qualifying controlled transactions — namely intercompany transactions involving distributors that perform baseline marketing and distribution activities in jurisdictions that adopt this simplified approach — may have the option to benefit from the administrative simplification and increased tax certainty provided by Amount B.
However, taxpayers shouldn’t use the approach to justify an arm’s length outcome when filing tax returns in jurisdictions that don’t elect to apply it, as additional steps must be taken to achieve recognition of its position by the relevant jurisdictions.
Also, proper documentation is still required to ensure the correct application of this approach.
The intention is for the Inclusive Framework to include an optional qualitative scoping criterion for identifying distributors performing non-baseline activities, and to reach a consensus on the low-capacity jurisdictions that fall under Amount B by March 31, 2024.
What changes with OECD amount b guidance?
Here’s a breakdown of what’s changed.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
