OECD Amount B: A Practical Overview of the Simplified and Streamlined Approach

amigoldenstein
2 days ago
3 min read

Updated: 1 day ago

The OECD’s Amount B framework represents a significant shift in the application of transfer pricing to baseline marketing and distribution activities. Originally released on 19 February 2024, and consolidated in the 2025 OECD report, Amount B forms part of Pillar One and aims to simplify pricing, reduce disputes, and enhance tax certainty, particularly for low-capacity jurisdictions.

The guidance has now been formally incorporated into the OECD Transfer Pricing Guidelines as an Annex to Chapter IV, reinforcing its position within the broader transfer pricing architecture. Importantly, jurisdictions may apply the simplified and streamlined approach to fiscal years beginning on or after 1 January 2025.

Scope and Key Features

Amount B applies to baseline distribution activities, including buy-sell distributors, sales agents, and commissionaires. However, the scope is intentionally limited.

Notably, the framework excludes:

Distribution of digital goods
Services
Commodities

Scoping Criteria

To qualify, transactions must meet both qualitative and quantitative conditions:

1. One-sided method applicability

The transaction must be capable of being reliably priced using a one-sided transfer pricing method, with the distributor as the tested party.

2. Operating expense filter

The tested party must have operating expenses within a defined range:

Minimum: 3% of net revenue
Maximum: 20%–30% of net revenue (jurisdiction dependent)

To ensure stability, this ratio is calculated using a three-year weighted average.

Industry Groupings

The framework introduces three industry groupings, reflecting differences in profitability across sectors:

Group 1: Consumer staples and basic goods (e.g., groceries, construction materials)
Group 2: Broad commercial and consumer goods (e.g., electronics, pharmaceuticals, vehicles)
Group 3: Industrial and specialized equipment (e.g., machinery, tools)

These groupings are used in determining the appropriate return under the pricing matrix.

Pricing Framework and Outcomes

The simplified approach relies on a three-step pricing mechanism:

Application of a Return on Sales (ROS) matrix
An operating expense cap-and-collar cross-check
A data availability adjustment mechanism

The resulting return is determined within a narrow range, with a tolerance of ±0.5%, reflecting the OECD’s move toward standardization.

Importantly, when applying the method, it is not necessary to test all transfer pricing methods or prove that alternative methods are unsuitable.

Net Risk Adjustment

In addition, the OECD introduced a Net Risk Adjustment Percentage (NRAJ) for qualifying jurisdictions. This adjusts returns to reflect differences in market conditions and data availability.

Documentation and Consistency Requirement

Taxpayers electing to apply Amount B must:

Include documentation in the local file
Provide consent to apply the approach for a minimum of three years

This requirement is intended to prevent selective or opportunistic application.

Tax Certainty and Limitations

Despite its standardization benefits, Amount B has important limitations:

The outcome is non-binding on the counterparty jurisdiction
It should not be relied upon in MAP or arbitration as an automatically acceptable arm’s length outcome

This creates potential for continued double taxation where jurisdictions do not align.

Practical Use in APA Discussions

While Amount B is formally optional and non-binding, it is already proving to be highly relevant in Advance Pricing Agreement (APA) discussions.

In practice:

Tax authorities are increasingly using Amount B as a reference point or anchor in negotiations
It provides a structured and OECD-endorsed framework for baseline distribution returns
It helps narrow negotiation ranges and reduce disputes over benchmarking

Notably, practitioners have observed that the U.S. APMA is already referencing Amount B concepts in discussions, signaling early alignment with the framework. As a result, Amount B is becoming a practical tool for negotiating outcomes.

OECD Automation Tool

To facilitate implementation, the OECD has released a Pricing Automation Tool, which: