Executive summary

On 4 December 2024, the Dutch State Secretary of Finance (Finance Secretary) published a decree on the application of Amount B of Pillar One in the Netherlands (Decree). The Decree enters into force on 1 January 2025 and acknowledges that the Netherlands commits to accept the outcome of the application of Amount B by covered jurisdictions with which it has concluded a bilateral tax treaty. This commitment applies to both legal entities and permanent establishments. Amount B is not introduced for Dutch taxpayers performing baseline marketing and distribution activities.

Detailed discussion

Introduction

Amount B of Pillar One is an intended simplification of transfer pricing rules for determining the remuneration for baseline marketing and distribution activities. The Organisation for Economic Co-operation and Development (OECD) published the report Pillar One — Amount B on 19 February 2024 (Report) as part of the Two-Pillar Solution to the Tax Challenges of the Digitalisation of the Inclusive Framework on BEPS (Inclusive Framework).¹ The Report provides guidelines and recommendations for the application of Amount B and is included as an appendix to Chapter IV of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (OECD TP Guidelines).

The application of Amount B is optional. This means that countries may choose whether, and how, to implement Amount B in their national laws and regulations for baseline marketing and distribution activities in their country. In the Report, the members of the Inclusive Framework, including the Netherlands, committed to accepting the outcome of the application of Amount B to the extent that it will be applied by covered jurisdictions. The Report was supplemented on 17 June 2024 with the designation of jurisdictions belonging to the list of covered jurisdictions, as well as the qualifying jurisdictions as described in the Report.²

Amount B Decree

The Decree describes the consequences of the international agreement of the Inclusive Framework on Amount B of Pillar One for taxation in the Netherlands. The Decree states that at the time of Report's publication, it was expected that Amount B would mainly be implemented in countries with generally limited information available in the public domain regarding comparable transactions between unrelated parties. In many cases, these countries will also be the ones with limited capacity in their tax administration.

Against this background, the Finance Secretary indicates that Amount B will not be introduced for Dutch taxpayers performing "routine" marketing and distribution activities, which is the term used throughout the Decree as Dutch translation for "baseline" activities. This also means that the application of Amount B in a counter-party jurisdiction that performs routine marketing and distribution activities will not be followed by the Dutch Tax Administration, unless this is a covered jurisdiction. For a covered jurisdiction, the Netherlands will take all reasonable steps to prevent or eliminate double taxation arising from the application of Amount B. The Decree requires that covered jurisdictions must have implemented Amount B in their laws and/or regulations in the relevant year, and a bilateral tax treaty with the Netherlands must apply.

If these conditions are met and Amount B is correctly applied, the Dutch Tax Administration will eliminate any double taxation that may arise in this respect and make a corresponding adjustment. The Tax Administration will not impose corrections in relation to the remuneration for these routine marketing and distribution activities, and the Dutch competent authority will respect the application of Amount B in the event that a mutual agreement procedure is requested in relation to a covered jurisdiction.

The Decree explicitly states that the above applies both to transfer pricing applied between affiliated entities and the profit attribution to permanent establishments. The guidance included in the Report does not contain a similar confirmation.

Implications

The Decree confirms the Netherlands' commitment to respect the application of Amount B by covered jurisdictions. It is important that companies continue to monitor how the jurisdictions that are relevant to their business choose to react to the implementation of Amount B. Specifically in the context of the Decree, companies will need to assess whether a jurisdiction that adopts Amount B is a covered jurisdiction and there is an applicable bilateral tax treaty with the Netherlands, as this will determine the potential impact on the pricing of their in-scope transactions. Companies should also take care to properly document their application (or non-application) of Amount B.