Does Amount B simplify the transfer pricing methodology for baseline marketing and distribution activities?

Globalisation and transfer pricing

In an increasingly globalised business environment, companies’ value chains and activities often extend across national borders. These global value chains are typically accompanied by pricing policies for, among other things, distribution activities. Such pricing policies have a direct impact on how profits or losses are allocated between different countries. Local tax authorities must therefore ensure that this allocation is carried out correctly.

What is Amount B?

With Amount B, the OECD provides a way to simplify and streamline the pricing of certain baseline marketing and distribution transactions between related parties. To achieve this, Amount B builds on the existing transfer pricing framework and adds a standardised method.

The OECD believes that Amount B will lead to fewer transfer pricing disputes, lower compliance costs, and greater tax certainty for both tax authorities and businesses.

Countries are free to decide whether or not to apply Amount B. They may choose not to implement it and continue with their existing approach. If they do opt for implementation, they can choose between a mandatory approach, where all in-scope taxpayers are required to apply it, or an optional approach, allowing businesses to decide for themselves whether to apply Amount B.

Who is eligible for Amount B?

As soon as a Belgian company has an international presence through a foreign subsidiary or branch, and marketing and/or distribution transactions take place, it may fall within the scope of Amount B.

There are no financial thresholds to limit the scope of Amount B. It is therefore essential to assess whether the marketing and distribution transactions fall under this regime.

Qualifying transactions

• All buy-sell transactions where the distribution entity purchases goods from one or more related parties located in another jurisdiction, with a view to reselling them to third parties (wholesale).
• All transactions involving sales agents and commissionaires where the sales agent or commissionaire contributes to the wholesale distribution of goods by one or more related parties to third parties.

Qualitative and quantitative assessment criteria

If a company is involved in one of the qualifying transactions, a combination of qualitative criteria (such as the functional and risk profile) and quantitative criteria (primarily financial ratios) is used to assess eligibility.

Exclusion criteria

There are specific exclusions for:

• Intangible assets
• Services
• Commodities
• Situations where non-distribution activities are carried out that cannot be evaluated separately from the qualifying transaction

Hoe werkt de prijszetting onder Amount B?

Based on a global dataset, the OECD has developed a so-called pricing matrix within which the distributor’s remuneration (return on sales) must fall. The exact point within this matrix depends on three criteria:

• A financial ratio based on assets
• A financial ratio based on operating expenses
• The industry in which the company operates

Taxpayers applying the Amount B pricing methodology must include this in their transfer pricing documentation (local file) and are required to apply the method for a minimum of three consecutive years.

Check whether your company qualifies

Although it is not yet clear which countries will implement Amount B and in what way (mandatory or optional), the rules could already apply as from 1 January 2025. It is therefore advisable to assess in a timely manner whether you qualify for Amount B. Given the broad scope of its application, there is a real possibility that this method will become the new standard for many businesses.

Do you have questions about Amount B and/or transfer pricing methods? Do not hesitate to contact us, we will be happy to assist you.

More information on transfer pricing can be found here.