The OECD’s Pillar One Amount B initiative has introduced the Simplified and Streamlined Approach (SSA), promising a more standardized pricing framework for in-scope distribution activities. However, as jurisdictions begin to consider their individual approaches to Amount B, multinational enterprises (MNEs) face significant uncertainty regarding its global application. In previous articles, we explored the SSA’s structure (Voice of RSM), including the concepts of covered and qualifying jurisdictions (Voice of RSM Special Edition). In this article, we focus on a critical issue: the varying interpretations of Amount B across jurisdictions and the potential double taxation risks that could arise from these inconsistencies.

This article is written by Shaun Britz ([email protected]) and Hendrik Bastiaans ([email protected]). Shaun and Hendrik are part of RSM Netherlands International Consulting Services with a focus on International Taxation and Transfer Pricing. 

Since the SSA introduces a formulaic approach and a pricing matrix for baseline marketing and distribution activities, it offers a potentially simplified compliance method for certain distribution activities within MNEs. However, without consistent international adoption and clear guidance on scope, jurisdictions may apply Amount B differently—or may choose not to adopt it at all. This variability could lead to unforeseen tax and compliance challenges, impacting companies operating across borders.

Current Status of Amount B Application

While the OECD has received substantial support for Amount B, with several jurisdictions indicating alignment with its outcomes, significant uncertainty remains around its practical implementation. This support—particularly from jurisdictions that have expressed a willingness to honor the SSA’s pricing matrix for in-scope transactions—reflects a positive step toward harmonization. However, many jurisdictions have yet to provide clear, consistent guidance on how they will implement Amount B, leaving MNEs with limited certainty as they prepare for compliance.

Adding to this uncertainty, the OECD’s flexibility in allowing jurisdictions to adopt Amount B as either a safe harbor or a mandatory rule introduces the potential for varying applications. This could mean that, even with the SSA’s structured pricing matrix, taxpayers could find themselves navigating diverse applications of the same principles across different jurisdictions which could potentially lead to double taxation.

Potential Tax Implications: The Risk of Double Taxation

As countries adopt different approaches to Amount B, MNEs may encounter double taxation risks due to conflicting requirements. For instance, if one jurisdiction mandates Amount B as a prescriptive rule while another does not implement it at all, an MNE could face inconsistent tax treatments. The jurisdiction applying Amount B mandatorily may enforce the SSA matrix, while the non-adopting country might rely on traditional benchmarking, potentially resulting in double taxation if the two outcomes do not align.

The table below provides a summary of how various combinations of implementation may impact transfer pricing outcomes and create potential conflicts. Ordered from low to high, the scenarios quickly indicate situations with the greatest potential for double taxation challenges.

Forward thinking

To navigate double taxation risks under varied applications of Amount B, MNEs must take a proactive approach. Conducting thorough assessments of each jurisdiction’s stance on Amount B allows MNEs to anticipate where conflicting interpretations may arise and prepare accordingly. Staying updated on policy developments helps companies identify and address potential double taxation risks early, ensuring transfer pricing practices remain compliant and defensible.

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