1.Global Minimum Tax: Challenges arising from digitalisation: Release of Amount B report to simplify transfer pricing rules and conforming changes to the Commentary of the OECD Model Tax Convention

[Vivek Jalan]

OECD/Inclusive Framework released its Final Report on Pillar One - Amount B. OECD expects that this approach will benefit Low-capacity jurisdictions (LCJs) which have limited resources and data availability. The report introduces two options for implementation for jurisdictions that opt into the simplified and streamlined approach from January 2025, describes the circumstances under which a distributor is within scope of Amount B (including cases where it also performs certain non-distribution activities, such as manufacturing), and sets out the activities that may exclude a distributor from the scope of the simplified and streamlined approach, such as the distribution of commodities or digital goods.

Specifically, India has recorded reservations/objections on several aspects, primarily concerning the incomplete nature of this guidance.  The guidance applies to the wholesale distribution of tangible goods and excludes the distribution of digital goods, commodities and services. The report suggests that it is optional for jurisdictions to adopt this approach on or after 1 January 2025. Further, jurisdictions can allow resident entities to choose to apply Amount B or prescribe/mandate the use of this approach. Taxpayers seeking to apply this approach should consent for a minimum of 3 years unless they fall out-of-scope. The outcome determined under this approach is non-binding on the counter-party jurisdiction. In case the counter-party jurisdiction does not adopt this approach, MAP resolution for eliminating any double taxation shall be arrived without reference to the simplified approach. The OECD/IF proposes to conclude this work with any further additions and provide the LCJ List by 31 March 2024.