Introduction
As part of the OECD’s Two-Pillar solution to address the challenges of digitalization in taxation, Pillar One’s “Amount B” aims to simplify transfer pricing for baseline marketing and distribution activities. It introduces a fixed return framework for distributors performing routine functions in their local markets.
What is Amount B?
Amount B provides a standard return for “baseline” distributors—those that do not own significant intangibles or bear substantial risks. The goal is to reduce disputes and compliance costs, especially in low-capacity jurisdictions.
Key Features
Scope: Applies to routine wholesale distributors of tangible goods.
Return: Provides a fixed operating margin (adjusted for industry and region).
Eligibility: Based on qualifying criteria including FAR analysis and documentation.
Safe Harbour Mechanism: Simplifies audit scrutiny for taxpayers who elect to apply Amount B.
Benefits of Amount B
Minimizes subjectivity in determining margins
Reduces the burden of full-fledged benchmarking
Enhances predictability and reduces audits
Adoption and Global Landscape
Several jurisdictions have signalled support for Amount B.
Countries with limited data or comparables find it especially helpful.
It may become an optional safe harbour or a mandatory method depending on jurisdiction.
Relevance for Indian Taxpayers
India has not officially adopted Amount B but is closely watching OECD developments.
For eligible taxpayers, it may offer relief where benchmarking data is weak or disputed.
It could potentially align with India’s domestic safe harbour provisions in the future.
Conclusion
Amount B is a game-changer in transfer pricing compliance. For companies engaged in routine distribution, this framework promises certainty, simplicity, and alignment with international best practices. Taxpayers should track local adoption and assess eligibility for future implementation.
