Pillar One

The Organisation for Economic Cooperation and Development (OECD) Pillar One framework operates under a two-tier approach: Amount A and Amount B. Amount A has been developed to address tax challenges in the digital transformation of the global economy globally, while Amount B provides a simplified and streamlined approach to transfer pricing in marketing and distribution activities.

Latest Pillar One news and developments

The latest developments in respect of Pillar One are set out below:

The new US administration has stated it may “retaliate” against countries which impose global minimum taxes (Pillar Two) and foreign digital services taxes (Pillar One Amount A) on US companies. Other governments are likely to review their commitment to the BEPS project in response, with potential impact on the implementation of Pillar One more widely. 27 February 2025

Consolidated Report Pillar One Amount B report published by the OECD. The Consolidated Report incorporates all agreed materials on Amount B which have been released since February 2024 to December 2024. Pillar One – Amount B report content is incorporated into the OECD Transfer Pricing Guidelines. February 2025

The new US administration has confirmed that commitments made under the prior administration on behalf of the US are no longer in effect, effectively withdrawing from the Pillar One and Pillar Two commitments. 20 January 2025

The OECD publishes a Pricing Automation Tool which can be used to compute the Amount B return, and may be used to model the potential impact of Amount B for a MNE. 17 January 2025

The Co-Chairs of the Inclusive Framework on BEPS provide an update on the status of developing Pillar One, with indications that the focus is on resolving outstanding issues on the Amount B Framework, with efforts on agreeing Amount A to follow. 13 January 2025

Pillar One Current status

Pillar One, unlike Pillar Two, is yet to be formally implemented into legislation in the UK or in other jurisdictions which have otherwise made commitments to the OECD’s global Base Erosion and Profit Shifting (BEPS) project.

Since February 2025, Pillar One Amount B has been incorporated into the OECD Transfer Pricing Guidelines. The OECD’s intention is clearly that it should apply to Multinational Enterprises (MNEs) operating in jurisdictions which ascribe to the OECD Transfer Pricing Guidelines.

The OECD Pillar One Amount B report, also published in February 2025, states that jurisdictions can choose to apply the simplified and streamlined approach for fiscal years commencing on or after 1 January 2025. As such, consideration should be taken by MNEs should consider whether they fall within the scope of Amount B and the implications this may have to determining the arm’s length pricing.

Amounts A and B – An Overview

We have provided this overview of both Amount A and Amount B to determine how these might apply to your business. We recommend any groups which may be in the scope of either amounts to consider how these may apply and keep an eye on progress of these developments.

Who Amount A applies to

Amount A applies to MNEs with revenues exceeding EUR 20 billion and with a profitability exceeding 10%. Where the MNE does not meet thresholds but one of its “Disclosed Segments” does on a standalone basis, then the Disclosed Segment is subject to Amount A.

Revenues and profits related to Extractives and Regulated Financial Services are excluded from Amount A calculations.

How Amount A works

Amount A operates to reallocate 25% of the MNE’s profit in excess of 10% of its revenues to market jurisdictions in which the MNE satisfies the “quantitative nexus test”. Profits are allocated in proportion to the revenue derived from those jurisdictions. It operates as an overlay to existing profit allocation rules such as transfer pricing and as such includes an elimination of double taxation.


Pillar One - Tax process diagram


The OECD expect Amount B to reduce transfer pricing disputes and compliance costs and enhance tax certainty. Jurisdictions can choose to adopt Amount B for in scope transactions for fiscal years commencing on or after 1 January 2025 as Amount B has already been incorporated into the OECD Transfer Pricing Guidelines.

Who Amount B applies to

MNEs must meet the following criteria for Amount B to apply:

Qualifying transactions – broadly consisting of buy/sell marketing and distribution transactions and sales agency & commissionaire transactions of tangible goods to unrelated parties

Qualitative scoping criteria – the tested party must be able to be priced using a one-sided transfer pricing method such not owning unique and valuable intangibles or bearing economically significant risks. The tested party must also not be involved in excluded transactions, which includes:

  • Distribution of services, commodities or digital goods
  • Distributions of retail sales above 20% of total net revenue
  • Non-distribution activities, such as manufacturing, R&D and procurement, unless these non-distribution activities can be reliably segmented and separately priced

Quantitative scoping criteria – the tested party should not incur annual operating expenses <3% or greater than the upper bound of between 20% - 30% of its net revenues, with the operating expense intensity (OES) calculated on a three-year weighted average basis

Pricing matrix

MNE groups in scope of Amount B must determine the industry grouping, based on the product being distributed by the tested party, and the factor intensity classification based on the operating expense intensity and net operating asset intensity (OAS).

Based on the industry grouping and operating asset intensity, the pricing matrix below is used to determine the return of sales for the tested party.


Industry GroupingIndustry Grouping 1Industry Grouping 2Industry Grouping 3
Factor Intensity


(A) OAS 45% or more, any level of OES3.50%5.00%5.50%
(B) OAS 30% to 44/99%, any level of OES3.00%3.75%4.50%
(C) OAS 15% to 29.99%, any level of OES2.50%3.00%4.50%
(D) OAS less than 15%, OES 10% or more1.75%2.00%3.00%
(E) OAS less than 15%, OES less than 10%1.50%1.75%2.25%


The pricing matrix produces a range of +/- 0.5%, eg “Factor Intensity 2, Industry Grouping 2” provides a range of 2.5% - 3.5%.

Operating expense cross check

The operating expense cross check operates as an overlay to the return on sales % applicable above. This operates whereby a further calculation is required, which uses the current year only to calculate an equivalent return on operating expenses using the return on sales under the pricing matrix.

Cap and collar rates apply to the operating asset intensity calculations performed in determining where the tested party sits within the pricing matrix. Where the tested party is based in a qualifying jurisdiction, alternative cap and collar ranges apply for the operating asset intensity result.

Under the operating expense cross check, comparisons are required between the equivalent return on operating expenses calculated above against the cap and collar. Where the cap and collar are triggered, an adjustment is required.

Data availability mechanism

Where the tested party is in a qualifying jurisdiction, a calculation is required on the adjusted return on sales under the data availability mechanism. The adjustment is made by reference to the sovereign credit rating of the qualifying jurisdiction.

Considerations for MNE groups

Application of the Pillar One rules

MNE groups should consider whether they fall within the scope of Amount A or Amount B. They will need to understand that the OECD Framework does not apply a threshold at which Amount B will apply, in contrast to Amount A and Pillar Two. Any MNE with related party distribution functions are encouraged to consider if they are within the criteria set out in the Pillar Two Amount B framework.

Amount B provides a steer in regard to what may be expected by OECD jurisdictions as to the arm’s length pricing for related party distribution transactions, even if it is not yet legislation. As such, a consideration as to It may be helpful for MNEs to document and overlay their position as to the application of Pillar One Amount B in any current transfer pricing documentation.

Customs computations

Where Amount B applies to an MNE, the relationship between transfer pricing, product costs and customs implications will need to be considered. Where Amount B applies to an in-scope transaction, this will set a transfer pricing policy which may deviate from the pricing currently being applied by the MNE group to the transaction. Changes to a transfer pricing policy in respect of intercompany transactions involving tangible goods are likely to trigger the need for a review of customs duties and taxes and how these are being computed for the entities party to the transaction.

We would be delighted to provide more information on how we can help your business as it reviews the impact of Pillar One. Please get in touch

Key Contacts

Ross Robertson

Ross Robertson

International Tax Partner
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