The CIOT has responded to the OECD consultation Pillar One: Amount B on simplifying the transfer pricing of baseline marketing and distribution activities in accordance with the arm’s length principle. Key points include:
Transactions within the scope of Amount B will be priced by reference to a pricing matrix. Mandatory application of Amount B could result in unintended results where, for example, the business in question differs from the models envisaged by the pricing matrix. Implementation as an optional safe harbour would enable businesses to elect not to use Amount B.
Creating extra administrative burden is one potential problem that flows through Pillar One. Even if optional, Amount B could add to this, with businesses and tax administrations needing to apply full transfer pricing principles to transactions that fall outside scope. On balance, however, an elective safe harbour regime founded on principles of simplicity is likely to be used by businesses and would be beneficial.
The CIOT makes a number of interesting points around scope and qualifying criteria, including allowing non-baseline activities to be ignored where they do not change the transfer pricing outcomes (avoiding the need to separate out the activities).
Work required to ascertain whether Amount B applies should be kept to a minimum, avoiding the need for full transfer pricing analysis.
The CIOT has responded to the OECD consultation Pillar One: Amount B on simplifying the transfer pricing of baseline marketing and distribution activities in accordance with the arm’s length principle. Key points include:
Transactions within the scope of Amount B will be priced by reference to a pricing matrix. Mandatory application of Amount B could result in unintended results where, for example, the business in question differs from the models envisaged by the pricing matrix. Implementation as an optional safe harbour would enable businesses to elect not to use Amount B.
Creating extra administrative burden is one potential problem that flows through Pillar One. Even if optional, Amount B could add to this, with businesses and tax administrations needing to apply full transfer pricing principles to transactions that fall outside scope. On balance, however, an elective safe harbour regime founded on principles of simplicity is likely to be used by businesses and would be beneficial.
The CIOT makes a number of interesting points around scope and qualifying criteria, including allowing non-baseline activities to be ignored where they do not change the transfer pricing outcomes (avoiding the need to separate out the activities).
Work required to ascertain whether Amount B applies should be kept to a minimum, avoiding the need for full transfer pricing analysis.
