In a globalized economy in which multinational enterprises organize their activities through increasingly complex and cross-border value chains, transfer pricing remains a structural source of tax uncertainty. This is particularly true for so-called baseline marketing and distribution activities, where such limited functions still often give rise in practice to complex discussions, divergent tax interpretations and lengthy disputes between taxpayers and tax administrations.

 

 

With Pillar One – Amount B: Inclusive Framework on BEPS (“OECD Report 2024”), the OECD puts forward a simplified framework designed precisely to address this area of tension. The Belgian tax administration sets out its position on Amount B in Circular Letter 2026/C/45 of 19 March 2026 (“Circular Letter”), which is added as an addendum to Circular Letter 2020/C/35.

In this newsflash, we provide a brief explanation of the Circular Letter and its scope of application. For a discussion of the consolidated report dated 19 February 2025, which does not introduce any substantive changes to the OECD Report 2024, we refer to our previous newsflash.

1. Pillar One – Amount B

Amount B introduces a Simplified and Streamlined (S&S) approach for applying the arm’s length principle to baseline marketing and distribution activities by providing a pricing framework that determines the margin on distributors’ sales in respect of their marketing and distribution activities. In doing so, the OECD aims not only to simplify the technical application of the transfer pricing rules, but also to reduce the broader tax uncertainty that may arise from such intragroup transactions.

2. Scope of application

The Belgian tax administration takes the view that the S&S approach produces an arm’s length outcome for marketing and distribution activities if the following cumulative conditions are met:

• This approach must be applied by so-called covered jurisdictions to their resident taxpayers in respect of intragroup transactions carried out in their territory. From a Belgian perspective, this means in principle that a Belgian entity is involved in an intragroup transaction with an associated counterparty in a covered jurisdiction, where that jurisdiction applies the S&S approach to its in-scope tested party. Covered jurisdictions are jurisdictions that have committed to supporting Amount B. The Belgian tax administration undertakes to respect the outcome obtained where such a covered jurisdiction applies the S&S approach to qualifying intragroup transactions.
• The covered jurisdictions must have implemented the S&S approach in their domestic legislation, and its application must be consistent with the OECD Report 2024 and any subsequent amendments thereto.
• A double tax treaty must be in place between the relevant covered jurisdiction and Belgium.

At the time of writing, the following countries accept, subject to conditions, an Amount B outcome where a covered jurisdiction applies Amount B: the Netherlands, Ireland, Germany and Luxembourg.

It is important to note in this respect that the S&S approach does not apply to qualifying intragroup transactions that are carried out exclusively within Belgian territory.

• “Qualifying intragroup transactions” essentially include marketing and distribution transactions whereby the distributor purchases goods from associated enterprises for wholesale distribution to unrelated parties, as well as transactions involving sales agents and commissionaires that participate in the wholesale distribution of goods from associated enterprises to unrelated parties. In addition, the Circular Letter confirms that intragroup transactions fall within the scope only if, having regard to their economically relevant characteristics, they can be reliably priced using a one-sided transfer pricing method, and if the tested party falls within the prescribed operating expense-to-net revenue ratio range, i.e. annual operating expenses that are neither lower than 3% nor higher than a threshold between 20% and 30% of its annual net revenues.

The following intragroup transactions are explicitly excluded from Amount B:

• Intragroup transactions involving unique and valuable contributions, or where contributions cannot be reliably evaluated separately.
• Intragroup transactions where all parties jointly assume the economically significant risks associated with the transaction, or where economically significant risks are so closely interrelated that separate allocation is not possible.
• Distribution of intangible goods and services, and the marketing, trading or distribution of commodities.

3. Pricing matrix

The arm’s length remuneration is further determined on the basis of a pricing matrix that sets the applicable return on sales, i.e. the operating profit margin, by reference to the relevant industry grouping and two factor intensity indicators of the tested party. That return may subsequently be affected by the operating expense cross-check mechanism and, where applicable, by the data availability mechanism.

4. Transfer pricing documentation

Although the Circular Letter recommends documenting the application of the S&S approach where the relevant information is not yet included in the existing transfer pricing documentation, the Belgian transfer pricing documentation requirements have not yet been specifically adapted to Amount B. Form 275 LF currently does not contain a separate section for Amount B or for the S&S approach as such.

In practice, this means that any application of Amount B will currently have to be incorporated within the existing structure of the (OECD) Local File, in particular through the identification of the relevant group entities and transactions, the indication of the transfer pricing method applied and the underlying documentation supporting that approach.

Although Amount B therefore does not, for the time being, give rise to a separate formal reporting obligation in Form 275 LF, it is advisable in practice to clearly explain in the underlying (OECD) Local File documentation, at a minimum, why the intragroup transaction falls within the scope, which entity is identified as the tested party, which covered jurisdiction is involved, which method was applied and how the resulting outcome aligns with the OECD framework and the Circular Letter.

Finally, the Circular Letter applies to intragroup transactions and profit attribution to permanent establishments taking place as from 1 January 2025.

Key takeaways

The relevance of the above should not be underestimated. Whereas transfer pricing analyses traditionally rely on factual nuances, benchmarking and differences in interpretation, Amount B is specifically intended to provide greater certainty in situations where such discussions often weigh disproportionately heavily compared to the economic profile of the activities concerned.

The Circular Letter confirms that Amount B also has a place within the Belgian transfer pricing framework, albeit as a limited and conditional acceptance mechanism rather than as a generally applicable simplification rule. For multinational enterprises with cross-border distribution or commissionaire structures, it is therefore advisable to assess in good time whether their structures may fall within the scope of Amount B, whether a covered jurisdiction is involved and whether their existing transfer pricing documentation and methodology remain aligned with the new framework.

Assistance may be particularly appropriate in relation to the scoping analysis, the assessment of the conditions set out in the Circular Letter, alignment with the existing transfer pricing policy and the evaluation of double taxation risks.

Authors: Tine Slaedts, Patrik Pashaj, Stefanie Van der Straeten