Background

Amount B of Pillar One is an optional simplified and streamlined approach (S&S Approach) for the application of an approximation of the arm’s length principle to baseline marketing and distribution activities (BMDA). Amount B provides a pricing framework which includes a 3-step process to determine a return on sales (RoS) for in-scope wholesale distribution of goods. Jurisdictions can choose to apply Amount B for fiscal years beginning on or after 1 January 2025. There is no minimum revenue threshold for the application of Amount B.

The S&S Approach, as included in the Pillar One Amount B Report of February 2024 (Report), is incorporated as annex to Chapter IV of the OECD Transfer Pricing Guidelines and aims to reduce the compliance burden and to efficiently resolve disputes in respect of BMDA. Following the guidance that was published by the OECD Inclusive Framework (IF) on 17 June 2024 (June Guidance), members of the IF commit to respect remuneration outcomes under the S&S Approach when applied by any of the Covered Jurisdictions.                                                     

We refer to our previous website posts for more background on the Report and June Guidance.

Amount B Decree

With the issuance of the Amount B Decree, the Dutch State Secretary of Finance outlines the Dutch implementation of the S&S Approach as formulated in the June Guidance.

Pursuant to the Amount B Decree, the S&S Approach will not be introduced for BMDA performed in the Netherlands. However, the outcome of the S&S Approach will under conditions be accepted for Dutch taxpayers that are involved in intercompany transactions covering BMDA that are performed in ‘Covered Jurisdictions’. The provisions in the Amount B Decree apply both to intercompany transactions and profit allocations to permanent establishments.

The Dutch Tax Authorities will accept the outcome under the S&S Approach for the fiscal year in question if the following criteria are satisfied in that same year:

  • The BMDA must be performed in a Covered Jurisdiction;
  • The S&S Approach must be implemented in the domestic legislation of the Covered Jurisdiction;
  • A bilateral tax treaty between the Covered Jurisdiction and the Netherlands must be applicable; and
  • The Covered Jurisdiction must apply the S&S Approach in accordance with the Report.

The June Guidance includes a list of Covered Jurisdictions, consisting for example of ‘low-capacity jurisdictions’ but also particular low- and middle-income OECD and G20 member countries. According to this June Guidance, the inclusion of any additional countries in the list of Covered Jurisdictions will be subject to approval by the IF but may be requested by any non-IF member meeting the criteria. The review of the list is every 5 years, and is made available on the website of the OECD.

Albania l Angola l Argentina l Armenia l Azerbaijan l Belarus l Belize l Benin l Bosnia and Herzegovina l Botswana l Brazil l Burkina Faso l Cabo Verde l Cameroon l Congo l Costa Rica l Côte d’Ivoire l Democratic Republic of the Congo l Djibouti l Dominica l Dominican Republic l Egypt l Eswatini l Fiji l Gabon l Georgia l Grenada l Haiti l Honduras l Jamaica l Jordan l Kazakhstan l Kenya l Liberia l Malaysia l Maldives l Mauritania l Mauritius l Mexico l Moldova l Mongolia l Montenegro l Morocco l Namibia l Nigeria l North Macedonia l Pakistan l Papua New Guinea l Paraguay l Peru l Philippines l Saint Lucia l Saint Vincent and the Grenadines l Samoa l Senegal l Serbia l Sierra Leone l South Africa l Sri Lanka l Thailand l Togo l Tunisia l Ukraine l Uzbekistan l Viet Nam l Zambia 

What can taxpayers do?

Taxpayers can, taking into account the Report, June Guidance and the Amount B Decree, assess whether (i) their wholesale distribution activities are in scope for the application of Amount B, and (ii) their remunerations align with the returns from the pricing matrix, considering any applicable profitability adjustments. In case of alignment, we recommend including this in your transfer pricing documentation to mitigate the risk of challenges. If there would be differences with Amount B, we recommend further assessing and, if possible, substantiating these differences in your transfer pricing documentation.

We will keep you informed about further developments. Should you have any questions or need assistance in assessing the impact of the Amount B Decree, please contact a member of our Transfer Pricing team or your trusted Loyens & Loeff adviser.