The Organisation for Economic Co-operation and Development (OECD) has released the "Pillar One – Amount B" report which provides a simplified approach to the application of the arm's length principle to baseline marketing and distribution activities. The document answers the call of low-capacity countries which report that as much as 70% of their transfer pricing disputes relate to marketing and distribution activities.


The "Pillar One – Amount B" report will provide local tax authorities with the option of applying simple and clear (at least in theory) rules to baseline marketing and distribution activities, at the same time allowing them to secure tax revenue and reduce disputes with taxpayers.

For enterprises, the implementation of the OECD's proposal would mean reduced tax risk as well as saving time and resources on transfer pricing compliance.


Who could benefit from the solution proposed by the OECD?

In line with the report, the following transactions qualify for the application of the simplified approach:

  • marketing and distribution transactions – where the distributor purchases goods from one or more related entities for wholesale distribution to unrelated parties;
  • sales agency and commissionaire transactions – where the sales agent or commissionaire contributes to wholesale distribution of goods by a different entity from the group to unrelated parties.

Learn more about transfer pricing

The report sets out the conditions which must be met by a local entity making distribution transactions or providing marketing services in order to be covered by Amount B (e.g. not taking substantial risk or the absence of unique intangible assets). The document also outlines the course of action if, in addition to the baseline distribution activity, the entity performs other types of activities, e.g. manufacturing.

The OECD report generally presents two implementation methods of the provisions by individual countries: 

  1. on the basis of the "safe harbour" principle – taxpayers and tax authorities may apply Amount B if a transaction meets specified criteria; 
  2. as a mandatory rule – where both taxpayers and tax authorities have to apply Amount B if 
    a transaction meets specified criteria. 

The report states that the most appropriate method for the verification of local profitability is the transactional net margin method or – alternatively – the comparable uncontrolled price method using internal comparables.  

The OECD has also prepared a pricing matrix for transactions covered by the report determining market profitability ranges using the return on sales (ROS) indicator. The admissible profitability, depending on the classification of transactions into specific categories, oscillates within 1.5% and 5.5%. 


When will the simplified approach to the application of the arm's length principle to baseline marketing and distribution activities be implemented?

The implementation of the provisions set out in the "Pillar One – Amount B" report is not obligatory. However, those countries which will decide to implement the said provisions may do it not earlier than for tax years beginning after 1 January 2025 (therefore reported already in 2026)

As of now, it is not known if (and when) Poland will decide to implement these provisions into Polish law. We can only keep our fingers crossed that it will happen.