OECD Consolidated Report on Amount B Provides TP Shortcuts

On February 24, 2025, the OECD published its Consolidated Report on Amount B, consolidating every piece of guidance issued by the Inclusive Framework between February 2024 and December 2024, along with the June 2024 clarifications on “qualifying” and “covered” jurisdictions and the September 2024 Model Competent Authority Agreement. Although the compilation may seem administrative, it is the clearest indication for multinational groups that the new transfer pricing shortcut will become operational from the financial year 2025.

Why “Amount B”?

The nomenclature dates back to the 2019–20 “Blueprint” for Pillar One of the BEPS 2.0 project. “Amount A” is the headline act. It reallocates a slice of the residual profits of the world’s largest, most profitable companies to the markets where their customers sit, regardless of physical presence. “Amount B,” by contrast, deals with the routine profits of vanilla buy-sell distributors. The OECD opted for a lettered scheme - A for residual, B for baseline - to signal that these are modular building blocks that can be switched on or off without rewriting the entire transfer‑pricing rulebook.

Is There an Amount C?

In the early consultations, a third block “Amount C,” was floated as a mechanism for claiming extra profit where a distributor performs functions that go beyond the baseline return fixed under Amount B. The idea has not disappeared. Advisers expect it to resurface in bilateral disputes and competent‑authority negotiations once the simplified formula is widely established and adopted.

What Amount B Actually Does and Why It Matters

Amount B gives basic distributors of physical goods a set profit margin, worked out with a simple three‑step test. Using it is optional, and the same rules cover both large and mid‑sized companies. The system is designed for tax offices with limited staff who struggle to audit comparables. By asking for less evidence, the OECD hopes to cut costs, reduce disputes, and let auditors spend their time on tougher cases.

For businesses, the new rules promise speed and predictability at a time when jurisdictions are growing more assertive about allocating taxing rights. For treasury departments, the report is a planning wake‑up call: adopting Amount B could lock in lower margins in high‑risk markets, but opting out will invite sharper scrutiny under the traditional transfer pricing regime. Either way, the clock is ticking because once “Amount A” enters into force, tax authorities will view the lettered amounts as a package rather than a menu.

The Two‑Speed Roll‑Out: Amount B is Live, Amount A Still Awaits Take‑Off

Few acronyms in the BEPS 2.0 lexicon are more easily confused than “Amount A” and “Amount B.” Yet the two follow radically different legal tracks, and only one of them is actually in force.

What has happened so far:

Amount B—the simplified, fixed-margin return for routine marketing and distribution of tangible goods was incorporated into the OECD Transfer Pricing Guidelines on February 19, 2024. Because the Guidelines are non-binding “soft law,” each jurisdiction can choose to apply the annex for fiscal years beginning on or after January 1, 2025. France, the Netherlands, Indonesia, and a growing list of others have already indicated they will do so.
Amount A—reallocating a portion of residual profit to market jurisdictions requires a binding Multilateral Convention (MLC) that overrides existing tax treaties. The MLC must (i) be signed by at least 30 jurisdictions representing 60% of the in-scope multinationals’ revenues, and (ii) be ratified domestically before an effective date can be declared. As of April 2025, the convention is not yet open for signature; several Inclusive Framework members are still negotiating the text.

Why do we have a split timetable:

Legal architecture—Amount B changes guidance, so countries can adopt it unilaterally. Amount A rewrites treaties and, therefore, needs formal ratification.
Political economy—Amount B is revenue-neutral and provides administrative relief, resulting in minimal opposition. Amount A visibly redistributes tax revenue.
Unresolved items—Amount B’s parameters (scope filters, margin matrix) were finalized in early 2024. Amount A still has unresolved footnotes regarding tax certainty, safe harbors, and the interaction with unilateral digital services taxes.

For financial year 2025, multinationals only need to decide whether to adopt Amount B. They should treat Amount A as a watch‑list item. No compliance steps are possible until the MLC is signed and ratified, which insiders suggest is unlikely to be before 2026 at the earliest.

Why the “Consolidated Report on Amount B” Is a Genuine Breakthrough

Published on February 24, 2025, the Consolidated Report on Amount B is more than just a tidy PDF; it marks the point when the OECD’s promised transfer‑pricing shortcut became usable, verifiable, and ready for worldwide rollout. Here are five clear facts that support that conclusion:

1. One‑stop reference instead of a paper chase. From February 2024 through December 2024, the Inclusive Framework released a final report, definitional clarifications, a Model Competent Authority Agreement (MCAA), fact sheets, and a pricing tool. The Consolidated Report compiles all of this into a single, citable package, thereby eliminating version control nightmares for taxpayers, advisers, and tax office officials.
2. First ever formulaic safe harbor in the OECD Guidelines. Until now, every cross-border sale, regardless of how routine, required a tailored comparables search. The new Annex to Chapter IV establishes a fixed return-on-sales matrix (1.5 % – 5.5 %), along with an operating-expense guardrail, which jurisdictions may adopt as either a taxpayer election or a mandatory rule. This is the first time the Guidelines endorse a globally applicable fixed margin.
3. Legal green light for 2025 filings. By folding the guidance into the soft‑law Transfer Pricing Guidelines, the OECD gives any country the legal cover to apply Amount B from fiscal years starting January 1, 2025 without amending domestic legislation or renegotiating treaties. The report even supplies a model MCAA so tax administrations can pre‑agree how to police the safe harbor across borders.
4. Level playing field for low‑capacity tax administrations. The report locks in the lists of “qualifying” and “covered” jurisdictions which are two politically sensitive tags that reserve the safe harbor’s lowest margins for developing countries with limited benchmarking data. Embedding those lists (subject to five‑year review) signals that the Inclusive Framework is serious about ease‑of‑administration, not just headline fairness.
5. Template for future formulaic solutions (Amount C and beyond). By overcoming internal scepticism and establishing a fixed-margin approach, the OECD has set a precedent. If Amount B works, negotiators can refer to it when reviving the shelved idea of Amount C (extra return for distributors that exceed the baseline) or when proposing formulaic methods for other low-value functions.

Operational Framework and Pricing Matrix

The OECD’s final guidance for Amount B introduces a standardized pricing matrix grounded in the Transactional Net Margin Method (TNMM), using return on sales (RoS) as its profit-level indicator. This structured approach provides multinational corporations and tax authorities a simplified, predictable method for pricing routine distribution transactions. The matrix considers the distributor’s industry sector and factor intensity, defined by two financial ratios:

Operating Asset Intensity (OAS) – operating assets divided by net revenue; and
Operating Expense Intensity (OES) – operating expenses divided by net revenue.

Based on these two ratios and the industry sector, Amount B assigns fixed arm’s-length profit margins as follows:

Industry Groupings:

Group 1: Perishable foods, groceries, household consumables, construction materials, plumbing supplies, metals.
Group 2: IT hardware, electrical components, clothing, pharmaceuticals, consumer electronics, automotive products, miscellaneous consumer goods.
Group 3: Medical and industrial machinery, industrial vehicles, tools, industrial components.

Practical Implementation and Key Challenges
In practice, Amount B provides a straightforward three-step process. Companies first confirm eligibility as routine distributors (performing only basic buy-sell operations without significant value-adding activities), identify their factor intensity, and then apply the standardized margin from the table above. The predefined margins range from approximately 1.5% to 5.5%, reflecting typical market benchmarks globally.

However, practical implementation is not without challenges. Taxpayers must accurately segment internal data and may need to adjust accounting systems to clearly isolate eligible transactions. For instance, a company distributing both consumer electronics and providing related installation services must carefully delineate these activities to apply Amount B solely to the eligible distribution portion. Without precise segmentation, the entity risks falling outside Amount B’s simplified scope.

Another complexity arises from the operating expense guardrail, designed to prevent unrealistic profit-to-expense ratios. Consider a distributor whose operating expenses sharply decline, causing a sudden spike in its profit relative to expenses. The guardrail mechanism would automatically cap the allowable margin, requiring careful annual recalibrations and potentially creating additional compliance burdens.

Comparison with Traditional Methods
The simplified approach contrasts significantly with traditional methods like CUP and TNMM. While TNMM traditionally involves a detailed comparables analysis, Amount B offers a standardized, globally calibrated margin, saving significant administrative costs and providing increased certainty. Nevertheless, companies must remain vigilant: if reliable internal CUP transactions exist—such as clearly comparable independent distributor arrangements within the same corporate group—these should take precedence over the Amount B matrix.

Tax authorities gain administrative efficiency through reduced audit complexity but face potential inconsistencies, as Amount B implementation is optional and unilateral across jurisdictions. This could lead to disputes where one country applies Amount B margins while another sticks to traditional analyses, potentially requiring bilateral resolution to avoid double taxation.

Hypothetical Edge Cases
Illustrative scenarios underscore potential complexities:

Borderline Eligibility: A distributor that also provides limited after-sales services risks disqualification unless it accurately segregates distribution-only activities.
Expense Ratio Sensitivity: A distributor operating at the margin of the OES guardrail may find minor operational changes disproportionately affect its required margins, necessitating frequent adjustments and coordination between tax jurisdictions.
Jurisdictional Discrepancies: A US parent with a distributor in India applying Amount B might face scrutiny from the IRS, which does not accept Amount B outcomes, risking double taxation unless mutual agreement procedures are proactively engaged.

In summary, Amount B represents a meaningful step toward simplification and predictability in transfer pricing for routine distributors. Yet, multinationals and tax authorities must navigate carefully through its practical implementation nuances, combining this new simplified tool effectively with traditional transfer pricing methods and bilateral cooperation mechanisms to achieve genuine tax certainty and reduce cross-border disputes.

Conclusion

The Consolidated Report on Amount B is like an “app‑store release.” The ideas were written last year, but the February 2025 bundle is the ready‑to‑use version for every tax authority on the planet.

By incorporating a formulaic safe harbor into the OECD Transfer Pricing Guidelines, the report provides low-capacity jurisdictions the administrative shortcut they have long needed, while offering multinationals the predictability they have long demanded. Countries can choose whether to use it, so it will spread unevenly, but the framework’s very existence resets the baseline: from now on, arguing over routine distributor margins is the exception, not the rule. If enough countries press “download” in 2025, Amount B will stand as the first proof that global tax reform can be both ambitious and practical, paving the way for bolder, formula-driven solutions in the years ahead.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Martin Bonner is a Managing Partner at AREA Bollenberger and Chair of the Kreston Global Transfer Pricing Goup. Jelena Mihić Munjić is Managing Director at Kreston MDM Serbia–Kreston Global.