The fact sheets provide a high-level overview of the mechanics of Amount B, including step-by-step instructions on how to apply Amount B. The Pricing Automation Tool was designed to price the return on sales for baseline marketing and distribution activities, requiring only minimal data inputs.
Days before this release, the Internal Revenue Service (IRS) issued a notice which announced the intention of the U.S. Department of the Treasury and the IRS to issue proposed regulations to implement the OECD’s Amount B for U.S. taxpayers. The notice states that the simplified and streamlined approach (SSA), as described in an OECD report published on 19 February 2024, would be added to the transfer pricing methods under Reg. §1.482.
Key Implications
OECD
As referenced in the Amount B guidance published by the OECD, jurisdictions can choose to apply the SSA for in-scope transactions of tested parties in their jurisdictions for fiscal years beginning on or after 1 January 2025.
The OECD has stated that inclusion of jurisdictions in the Pricing and Automation Tool is illustrative and does not mean any particular jurisdiction has adopted or intends to adopt Amount B. The list of jurisdictions implementing Amount B will be maintained separately by the OECD, including the date of adoption.
IRS
As stated in the IRS notice, U.S. taxpayers can elect to apply the SSA as a safe harbour for tax years beginning on or after 1 January 2025. The notice provides some U.S.-specific information regarding the SSA, including instructions on how taxpayers are to make the election via filing a statement with the taxpayer’s original tax return for the year.
The SSA would apply on a transaction-by-transaction basis for the tax year for which the election is made. However, Treasury and the IRS are considering alternatives to the transaction-by-transaction and year-by-year election. The notice also provides guidance on the documentation required to enable the IRS to verify that the taxpayer has complied with the SSA.
Next Steps
OECD
On 11 February 2025, the OECD will hold a webinar related to Amount B as well as a demonstration of the Pricing Automation Tool.
IRS
The notice requests comments on all SSA-related topics to be submitted by 7 March 2025.