🚀 Exciting Update on Transfer Pricing! As part of the OECD guidance on Amount B, a Simplified Approach has been introduced to streamline the evaluation for certain transactions.

Here's what you need to know:

1. Qualifying Transactions & Scope:

   • Applicable to buy-sell marketing, distribution transactions, and sales agency or commissionaire setups.

   • Requires reliable pricing using a one-sided transfer pricing method.

   • Tested party’s annual operating expenses must be between 3% and 30% of annual net revenues.

2. Exclusion Criteria:

   • Excludes transactions involving non-tangible goods or commodities.

   • Also excluded are scenarios where the tested party undertakes significant non-distribution activities, such as manufacturing or substantial service delivery, unless these can be reliably priced and evaluated separately.

   • This ensures that only transactions that are straightforward and have less ambiguity in their pricing are included under this simplified scheme.

3. Key Financial Terms:

   • Operating Expenses: Excludes COGS, pass-through costs, financing, investment activities, and taxes.

   • Net Operating Asset Intensity (OAS) and Operating Expense Intensity (OES): Both are calculated on a three-year weighted average basis.

4. Industry Grouping:

   • Group 1: Perishable foods, construction materials, household consumables.

   • Group 2: IT hardware, pharmaceuticals, consumer electronics.

   • Group 3: Medical and industrial machinery, and other industrial supplies.

5. Simplified Pricing Matrix:

   • A structured method to determine suitable returns for distribution activities based on industry group, OAS, and OES ratios.

   • Requires taxpayers to document proof of qualification and proper method application.

🔍 This approach aims to reduce complexity and ensure a more uniform application of transfer pricing rules. It’s a significant step towards clarity and efficiency in cross-border transactions.

💬 Could this be a game-changer for international business operations?

Connect with us now to explore the latest in transfer pricing! The OECD's new Simplified Approach promises clarity and efficiency for international business.