This lesson examines Amount B, the second component of Pillar One, which provides a simplified and streamlined approach to applying the arm’s length principle to baseline marketing and distribution activities, with particular focus on the needs of low-capacity countries.

• Purpose and Scope: Amount B provides a simplified and standardised approach in applying the arm’s length principle to baseline marketing and distribution activities. It is designed to ease the application of transfer pricing rules, especially in jurisdictions with limited administrative capacity. The simplified approach helps reduce disputes and compliance costs for both taxpayers and tax authorities.

• Incorporation into Transfer Pricing Guidelines: The optional Amount B framework was incorporated into the OECD Transfer Pricing Guidelines in February 2024. This represents a significant step in providing practical guidance for jurisdictions implementing this simplified approach.

• The Ongoing Amount B Framework: Discussions continued on a framework under which jurisdictions that become parties to the Amount A MLC will be required to apply Amount B to local taxpayers performing in-scope services. Under this Amount B Framework, jurisdictions would also be required to respect outcomes determined under Amount B when applied by other parties to the MLC with which an income tax treaty is in force.

• Outstanding Issues: As of early 2025, several outstanding issues remained, including: how to reflect the interdependence between the Amount A MLC and Amount B; what terms should be applied in a filter to screen out jurisdictions that account for a low number of disputes; what terms should be included in an optional qualitative test; and how to address concerns of some jurisdictions that the pricing matrix delivers inappropriate outcomes.