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    Moody’s and OECD Pillar One – Amount B

    March 2024

    Moody’s and OECD Pillar One – Amount B

    The Organization for Economic Co-operation and Development (OECD) released a new report on Pillar One – Amount B on 19 February 2024 as part of the OECD/G20’s Base Erosion and Profit Shifting (BEPS) project.

    The Pillar One – Amount B element of the BEPS 2.0 project focuses on one of the most common types of transfer pricing transactions (and disputes) globally, namely baseline marketing and distribution activities. This is a particular challenge for low-capacity jurisdictions with limited resources.

    The aim of the new guidance is to “simplify the application of transfer pricing rules with regards to baseline marketing and distribution activities, alleviate administrative burden, cut compliance costs, and enhance tax certainty for tax administrations and taxpayers alike.”[1] This gives each jurisdiction the option of applying these simplified rules to in-scope transactions for distributors, sales agents and commissionaires either as a ‘safe harbor’ or as a mandatory rule.  The rules could apply from fiscal years commencing on or after 1 January 2025.

    While the Pillar One – Amount B project goes some way in trying to simplify the application of the arm’s length principle for one particular type of transaction, it also highlights complexities in implementing this ‘simplified and streamlined approach’.  Further there is the risk that, at least in the short-term, Pillar One – Amount B may actually result in greater uncertainty and risk of double taxation, an unfortunate and unintended consequence of trying to achieve global consensus on a complex issue.

    Multinational enterprises are increasingly complex organizations, with the volume, value, and complexity of intercompany transactions only expected to increase in the coming years.  As such, the Pillar One – Amount B solution is not considered the blueprint for all other intercompany transactions going forward, with transfer pricing benchmarking expected to remain core to the application of the arm’s length principle. Making sure you’re using the best data available to support that intercompany transactions are priced in line with the arm’s length principle has arguably never been more important.

    In undertaking its BEPS 2.0 projects, the OECD has chosen to utilize the Orbis database to help in a number of different of areas of tax and transfer pricing.  In relation to the Pillar One – Amount B project, the Orbis database was used as the foundation to help determine the financial returns for baseline marketing and distribution activities on a global basis.  The OECD’s Pillar One – Amount B work highlights the benefits of the Orbis database as the leading data source for undertaking transfer pricing benchmarking globally with its unrivalled breadth and depth of quality and trustworthy public and private company information.

    In this complex landscape, the quality of data used to support intercompany transactions becomes paramount. Moody’s continues to lead the way with our tax and transfer pricing offerings, providing the global tax industry with robust tools to better navigate these complexities.


    Paul McSavage - Head of Tax & Transfer Pricing Solutions, Asia Pacific & Middle East


    [1] Page 3, OECD/G20 Base Erosion and Profit Shifting Project, Pillar One – Amount B, Inclusive framework on BEPS report.