| Image Credits: OECD Headquarters in Paris, France by OECD
The OECD/G20 Inclusive Framework on BEPS released a Model Competent Authority Agreement (MCAA) to support the implementation of the political commitment to Amount B of Pillar One. This initiative aims to assist jurisdictions, particularly those with limited resources and data, in adopting a simplified and streamlined pricing approach for baseline marketing and distribution activities.
KEY POINTS:
PURPOSE OF THE MCAA:
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The MCAA provides a practical and standardized tool to help jurisdictions implement Amount B efficiently.
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It is designed to benefit jurisdictions with limited resources by simplifying the application of the arm’s length principle to in-country marketing and distribution activities.
BENEFITS OF AMOUNT B:
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Offers a simplified approach to reduce transfer pricing disputes.
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Lowers compliance costs for tax administrations and taxpayers.
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Enhances tax certainty, particularly for low-capacity jurisdictions that face challenges with complex transfer pricing rules.
COMMITMENT TO MITIGATE DOUBLE TAXATION:
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Inclusive Framework members have committed to take all reasonable steps to alleviate potential double taxation that could arise from the application of Amount B.
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This commitment is especially relevant where bilateral tax treaties are in effect, ensuring the approach is fair and consistent.
GUIDANCE AND DEFINITIONS:
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Additional guidance published in June 2024 clarifies the definition of a covered jurisdiction under the Inclusive Framework’s commitment to Amount B.
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This guidance enables jurisdictions to begin implementing the streamlined approach.
FLEXIBILITY IN IMPLEMENTATION:
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While jurisdictions have flexibility in how they adopt Amount B, the MCAA provides a standard option that supports consistent and efficient implementation across member states.
ONGOING EFFORTS:
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Work continues on refining the Pillar One package, including enhancements to the Amount B framework.
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The Inclusive Framework remains dedicated to improving global tax certainty and reducing compliance burdens for all stakeholders, reaffirmed in the Statement from the Co-Chairs of the Inclusive Framework on May 30, 2024.
