The African Tax Administration Forum (ATAF) has released a technical note that offers an overview of the Amount B rule of Pillar One and its potential advantages for African nations.
Many ATAF members have reported that transfer pricing issues relating to in-country distribution activities are a major area of dispute and are a significant drain on their limited transfer pricing resources.
The optional simplified and streamlined approach, which countries can choose to apply for fiscal years commencing after 1 January, 2025, provides an opportunity for African countries to reduce the number of such disputes and create greater tax certainty for both African tax administrations and business.
This Technical Note highlights the design features ATAF considers of most importance if Amount B is to maximise benefits to African countries by increasing tax certainty for both African governments and multinational enterprises (MNEs) operating in Africa.
This Technical Note is the 12th in the ATAF Technical Note series on the tax challenges arising from the digitalisation of the economy. It has been designed to provide ATAF members with an overview of the Amount B rule of Pillar One, which was agreed upon in February 2024.
The Amount B rule was incorporated into the OECD Transfer Pricing Guidelines on 19 February 2024, and provides an optional simplified and streamlined approach that jurisdictions can choose to apply to qualifying transactions of in-scope distributors resident in their jurisdictions.
However, there were still some definitions within the rules that were not agreed upon at the time of the publication of this rule.
As the Inclusive Framework has now agreed on those definitions, ATAF is publishing this Technical Note to assist ATAF members in deciding whether to enact the optional simplified and streamlined approach.
The Note provides an overview of the main provisions of the approach and highlights the areas which ATAF considers to be of particular importance for African countries.
In addition, ATAF will shortly publish a revised version of the ATAF Suggested Approach to Drafting Transfer Pricing Legislation that includes provisions countries could include in their transfer pricing legislation and regulations to enact the optional simplified and streamlined approach.