OECD Introduces an Automation Tool for Transfer Pricing Calculation in Certain Distribution Companies (Pillar 1 - Amount B)

On December 19, 2024, the Organization for Economic Co-operation and Development (OECD) introduced an automation tool to automatically calculate certain transfer prices (the Pillar 1 Amount B for eligible entities). This initiative is part of the OECD’s efforts to harmonize and simplify transfer pricing calculations for routine distribution activities. In addition, technical briefs have been published to provide a simplified overview of the Amount B mechanisms.

Context and Objectives of Amount B

Amount B is part of the Pillar 1 international tax reforms led by the OECD and the G20. Its purpose is to streamline the application of the arm’s length principle to transactions involving low-value-added distribution activities. It aims to harmonize tax practices across countries to ensure greater legal certainty for multinational enterprises and to reduce the risks of double taxation or tax disputes.

The main objectives of Amount B are:

Simplification and standardization: Establishing a clear reference framework to prevent differences in interpretation between tax jurisdictions.
Reduction of compliance costs: By automating the process, businesses can minimize the need for costly analyses and complex negotiations with tax authorities.
Improved tax transparency: Tax authorities will have a tool that enables better control of cross-border transactions.

The Automated Amount B Tool

The OECD’s Amount B automation tool is an interactive Excel spreadsheet designed to assess the applicable margins for an individual distributor based on several financial and sectoral parameters. Currently, it does not allow for the simultaneous evaluation of multiple distributors.

How the Tool Works

The tool follows an input-output model in which users must provide key information, including:

The distributor's country
Three years of financial data: net revenue, cost of goods sold, operating expenses, fixed assets, working capital, and liabilities
The relevant industry or industries

Based on these inputs, the tool generates several key results:

Verification of compliance with quantitative criteria
Detection of any exceedance of the accounts payable threshold
Calculation of return on sales based on the price matrix
Determination of whether the standard or alternative cap rate applies
Assessment of necessary adjustments for operating expense limitations
Adjustments based on data availability
Calculation of the final return on sales, leading to the final determination of Amount B

The tool will be updated annually to reflect adjustments to the price matrix and other relevant parameters. Additionally, the OECD hosted a technical webinar on February 11, 2025, which included a demonstration of the tool’s functionality. This event allowed businesses and tax administrations to gain a deeper understanding of the tool and its implications.

Features and Implementation of the Automation Tool

The tool is based on a standardized methodology that automatically assesses whether an entity meets the necessary criteria for applying Amount B. It incorporates predefined benchmarks, market data, and sectoral parameters to establish a range of applicable margins. The goal is to prevent discrepancies in tax administration interpretations and to enhance consistency in transfer pricing assessments.

This tool operates via a digital platform accessible to tax authorities and relevant businesses. It simplifies tax filings and allows taxpayers to directly integrate the results into their compliance obligations. Moreover, automation helps reduce the risk of errors and speeds up analyses, thereby shortening review and validation timelines for cross-border transactions.

Switzerland’s Position

Currently, no mandatory threshold has been established for implementing Amount B, and Switzerland has yet to decide on its adoption. However, the Swiss government is actively monitoring developments and participating in international discussions regarding the tool's implementation. Switzerland favours a coordinated and multilateral approach to ensure a balance between tax compliance and economic competitiveness.

Consequences and Next Steps

The automation of Amount B calculations could facilitate multinational companies' compliance while reducing tax disputes. However, Swiss companies must closely monitor regulatory developments to anticipate any necessary tax adjustments. Increased oversight of the tool's benchmarks and parameters will be needed to ensure alignment with local and sectoral economic realities.

Implications for Businesses:

Reduced tax risk: By providing precise and validated data, the tool enables companies to limit their exposure to potential tax reassessments.
Time and efficiency gains: Simplifying documentation and validation processes reduces the administrative burden associated with transfer pricing.
International harmonization: Using a common reference framework fosters greater tax stability and minimizes conflicts between tax administrations.

Next Steps:

The OECD plans to support the tool’s implementation with training and guides to help businesses and tax authorities adopt it.
Member countries will need to decide whether to adopt the tool and under what conditions.
Switzerland may wait for initial feedback before making a final decision.

RSM Switzerland remains available to assist you in understanding and anticipating international tax reforms. We will closely monitor the evolution of Amount B and its potential impact on Swiss businesses to provide you with tailored and up-to-date advice.