2025 Brings New Challenges for Pillar One - Amount B

At the beginning of 2024, the OECD published the Final Report on Pillar One - Amount B (“Final Report“), outlining guidelines for implementing Amount B. These guidelines required further refinement, culminating in a supplementary document  released in June 2024. This iterative process underscores the OECD’s ongoing efforts to operationalize Pillar One, a cornerstone of its strategy to address tax challenges arising from the digitalization of the global economy.

• Amount A: Allocates a portion of residual profits to market jurisdictions or places of consumption.
• Amount B: Provides a simplified methodology for determining appropriate remuneration for routine marketing and wholesale distribution activities.
• Legal certainty mechanisms: Implements measures to prevent and resolve tax disputes.

Amount B excludes retail activities, commodity distribution, services (digital or otherwise), and intangible assets, as specified in the Final Report). The system is based on the net operating margin method and uses a return-on-sales (ROS) indicator, subject to possible adjustments based on the transaction’s characteristics.

Flexibility in Applying Amount B 

Unlike Pillar 2, Amount B is not mandatory in all its aspects. The Final Report outlines two application options:

• Voluntary adherence: Taxpayers may opt for the simplified model, accessible without size thresholds.
• Administrative application: Tax authorities may enforce the system even if a taxpayer has not opted in. 

The use of the comparable uncontrolled price (CUP) method is also allowed if reliable internal comparables exist, though such cases are to be expected to be rare. Despite its simplification, Amount B’s divergence form the arm’s length principle has raised questions about its acceptance and practical implementation.

Adoption at National and International Levels

In Portugal, the Tax Authority has yet to comment on Amount B. However, while direct application seems unlikely in the near term, Portugal may accept its use to prevent double taxation in line with international consensus.

Conversely, other countries, such as the United States (US), the Netherlands and Germany, have taken more proactive stances. Notably, the US Internal Revenue Service (IRS) and the Treasury Department issued Notice 2025-04 Application of the Simplified and Streamlined Approach under Section 482, which announces the intention to regulate the approach to Amount B and establishes the following measures: 

• Amount B will apply to tax periods starting on or after January 1, 2025, covering domestic and international transactions involving US counterparties.
• Taxpayers may opt for the simplified model if they meet formality, with the administrative application also possible, pending the outcome of a public consultation (open until March 7, 2025).
• The CUP method may override Amount B where reliable application is demonstrated.
• Specific criteria are defined for applying Amount B metrics in US.

While these US measures constitute a significant step toward facilitating the adoption of Amount B worldwide, we should consider that the recent change in the US government could alter the scope or implementation of these rules, and this will require close monitoring in the coming months. 

Support Tools and International Adaptation

To facilitate adoption, the OECD has developed an automated pricing tool (Pricing Automation Tool for the Simplified and Streamlined Approach). This Excel-based tool calculates the ROS based on industry type and asset intensity, helping taxpayers apply Amount B in practice (it can be accessed here).

Conclusion

Amount B is progressively becoming an international standard. However, its application varies by jurisdiction, with adaptations that reflect the specificities of each tax system. Therefore, for each transaction type and its destination, assessing the position adopted by other jurisdictions will be important, as well as the position Portugal ends up adopting, to ensure adequate compliance and minimize double taxation risks.