A new report from the OECD provides fixed margin ranges for limited risk distribution and commissionaire activities. The report forms an annex to the OECD Guidelines but it is currently unclear if Germany will apply the rules.


On 19 February 2024, the OECD released its final report on Pillar One Amount B, which relates to all cases of baseline marketing and distribution activities, e.g. so-called limited risk distribution or commissionaire structures. Similarly to the existing guidance on low value-adding services, the report provides ranges of returns that should not be contested as long as certain criteria are met. The approach aims to simplify the application of transfer pricing rules with regards to such activities, alleviate the administrative burden, cut compliance costs, and enhance tax certainty for tax administrations and taxpayers alike.


The approach can be applied to buy-sell marketing and distribution transactions, where the distributor purchases goods from related parties for wholesale distribution to third parties, and to sales agency and commissionaire transactions, where the sales agent or commissionaire contributes to a related party’s wholesale distribution to third parties.

The scope is limited to the wholesale distribution of tangible goods and does not include digital goods, services (including digital services) or commodities.

For a qualifying transaction to be in scope of the approach, it must exhibit economically relevant characteristics that mean it can be reliably priced using a one-sided transfer pricing method (i.e. the TNMM), with the distributor, sales agent or commissionaire being the tested party. This means that they should not own unique and valuable intangibles, nor should they assume certain economically significant risks. The tested party in the qualifying transaction must also not incur annual operating expenses above or below a set range, based on a three-year weighted average.


The simplified and streamlined approach for in-scope transactions then follows a three-step process:

  • Step 1 - Determine the relevant industry grouping out of three possible groups determined by the OECD. If less than 80% of the products distributed fall into a single industry grouping, a weighted average return across industry groupings should be calculated.
  • Step 2 - Determine the relevant factor intensity classification of the tested party based on a weighted average of the three preceding fiscal years. The relevant factor intensities are net operating asset intensity (OAS) and operating expense intensity (OES).
  • Step 3 - Identify the range from the provided pricing matrix that corresponds to the intersection of the industry grouping(s) and the factor intensity classification of the tested party.

Under Step 3, the industry grouping and the factor intensity are used to find the correct return on sales from a set pricing matrix, plus or minus 0.5 percentage points.

Further adjustments can be made when the determined return on sales leads to a return on operating expenses outside a defined cap and collar range, or where the tested party is located in a jurisdiction with a credit rating of BBB+ or worse.


It is assumed that the information relevant for the application of the simplified and streamlined approach is already included in the local files for the tested party. When the taxpayer is seeking to apply the simplified and streamlined approach for the first time, the taxpayer should include in its local file a consent to apply the approach for a minimum of three years, unless transactions are no longer in scope during that period or there is a significant change in the taxpayer’s business.


The Inclusive Framework is currently also working on an additional optional qualitative scoping criterion to identify distributors performing non-baseline activities for the purpose of the simplified and streamlined approach. The Inclusive Framework will conclude this work by 31 March 2024.

The new rules may be applied from 1 January 2025.

Legislators must decide as to whether the rules may be adopted in their jurisdiction, either by permitting tested parties resident within their jurisdiction to elect to apply the approach, or by requiring the use of the approach in a prescriptive manner where the scoping criteria are met.

The use of the approach for a tested party in a jurisdiction that has elected to apply the framework is non-binding on the jurisdiction of the other party to the transaction. If taxpayers file for a mutual agreement procedure (MAP) and one or more of the jurisdictions has not chosen to apply or accept the approach, then the approach may not be used as justification and taxpayers should base any justification of their position only on local laws and/or other parts of the OECD Guidelines.

Outlook and action items

It is to be hoped that the envisaged reduction in compliance costs and increase in tax certainty from the standardised and streamlined approach for Amount B will come to fruition. For this to happen, the approach will need to be recognised and accepted by as many jurisdictions as possible. As yet, Germany has not confirmed whether or not it will apply the approach.

Controversies around the approach are likely to centre on the classification of tested parties as being in scope or not. Hence, taxpayers looking to apply the approach of the tested party’s activities and implement processes to ensure that the actual functions and risks of the tested party match the documented profile. Processes to ensure the correct application of the approach will also be critical in ensuring that the tested party does not achieve returns outside the permitted range.

Similarly, where a taxpayer wishes to avoid using the approach, they should take care to document why the tested party is out of scope, for example due to the bearing of certain risks or ownership of significant intangibles, especially for jurisdictions where the approach is mandatory for in-scope entities.

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