Background and context

On 4 December, 2024, the Dutch State Secretary of Finance has published a decree that addresses the implementation of Amount B under Pillar One. Pillar One Amount B aims to simplify and streamline transfer pricing rules for baseline marketing and distribution activities, enhancing legal certainty and reducing disputes. The guidelines for Amount B are detailed in a report published by the OECD on February 19, 2024, and further supplemented on June 17, 2024.

Introduction to Amount B

Amount B is designed to streamline the process of determining compensation for baseline marketing and distribution activities. It aims to increase legal certainty for taxpayers and reduce disputes by simplifying the comparability analysis for these activities through a 3-step process to determine the arm’s length remuneration for in-scope wholesale distribution activities. Countries that implement Amount B allow taxpayers within its scope to use the guidelines and recommendations in the OECD report instead of conducting a full comparability analysis.

The implementation of Amount B is optional for countries, meaning they can choose whether and how to incorporate it into their national laws. However, the guidance on Pillar One Amount B is incorporated as an annex to Chapter IV of the OECD Transfer Pricing Guidelines. Jurisdictions can choose to apply Amount B for fiscal years beginning on or after 1 January 2025. The use of Amount B is expected to be particularly beneficial in countries with limited publicly available information on comparable transactions and those with constrained tax administration capacities.

Application in the Netherlands

The decree specifies that Amount B will not be implemented for Dutch taxpayers conducting baseline marketing and distribution activities within the Netherlands. However, it may impact corporate tax for Dutch taxpayers when applied in other countries under certain conditions as described below.

Amount B in relation to Covered Jurisdictions

Members of the Inclusive Framework, including the Netherlands, have committed to accepting the outcomes of Amount B as applied by Covered Jurisdictions. This commitment includes taking reasonable steps to prevent or eliminate double taxation resulting from the application of Amount B by these jurisdictions. Covered Jurisdictions must have implemented Amount B in their laws and have a bilateral tax treaty with the Netherlands in place in order for the Netherlands to provide relief.

When a Covered Jurisdiction applies the 3-step approach to determine Amount B correctly, the Dutch Tax Authorities will:

• Eliminate double taxation on related transactions with Dutch taxpayers through corresponding adjustments.
• Apply the same principles if a mutual agreement procedure is requested regarding the application of Amount B by a Covered Jurisdiction.
• Refrain from making adjustments related to the compensation for baseline marketing and distribution activities in a Covered Jurisdiction where the 3-step approach to determine Amount B is correctly applied.

These provisions apply to both transfer pricing between related entities and profit allocation to permanent establishments.

Next steps and key challenges

This positions the Netherlands as a cooperative player in global tax reform while maintaining a clear domestic policy stance. This highlights that taxpayers may face challenges that emphasize the need for proactive planning and robust compliance strategies.

Taxpayers should carefully evaluate:

• Whether their wholesale distribution activities fall within the scope of Amount B.
• Whether their remuneration aligns with the returns specified in the pricing matrix, including any necessary profitability adjustments.

Key challenges for taxpayers:

• Inconsistent implementation: Varying approaches across jurisdictions may lead to inconsistencies and added complexities.
• Compliance burden: Aligning with Amount B guidelines while adhering to local rules could increase administrative demands.