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Organization for Economic Cooperation and Development (OECD) releases a consolidated version of the model rules for Amount A including new building blocks

In brief

After several public consultations on individual elements of Amount A, the OECD has now released a consolidated version of the draft operative provisions on Amount A in its Progress Report dated 11 July 2022. The new publication includes model rules for three building blocks of Amount A that had not previously been dealt with, namely: Segmentation, Marketing and Distribution Profits Safe Harbor, and Elimination of Double Taxation. The OECD welcomes comments from the public no later than 19 August 2022. Further work on provisions dealing with withholding taxes, unilateral measures (such as digital services taxes) and administration, as well as tax certainty processes, is underway but has not been presented yet. These building blocks are expected to be released for public comments before October 2022.


Over the last few months, the OECD released a number of public consultation documents on individual building blocks of Amount A under Pillar One. The rationale behind this gradual approach was to involve stakeholders in the process of developing the model rules for Amount A as early as possible in light of the political momentum. However, the public’s recurring feedback on all the consultation documents was that substantive comments are only possible once the whole package of Amount A rules has been disclosed.

In its Progress Report, the OECD now presents the consolidated version of the entire draft operative provisions on Amount A and is seeking public comments. Stakeholders now have five weeks to submit their comments.

The Progress Report contains a mix of previously published and unchanged provisions, previously published and amended provisions, and newly published provisions. The “In depth” section of the alert below focuses on the particularly noteworthy changes to previously published and amended provisions and new rules.

Moreover, the Progress Report also contains an update on the expected timeline for pending elements and the eventual implementation of Pillar One.

  • Further progress on the remaining building blocks of Amount A (i.e., Withholding Taxes, Unilateral Measures and Administration) is expected to be presented prior to the OECD/G20 Inclusive Framework on BEPS meeting in October 2022. The aim is to confirm as far as possible all rules in connection with Amount A at this meeting.
  • The work on Amount B is planned to be delivered by the end of 2022.
  • A Multilateral Convention for implementing Amount A in a coordinated and consistent manner is expected to be open for signature in the first half of 2023. Assuming a critical mass of jurisdictions will swiftly sign and ratify the Multilateral Convention, Amount A under Pillar One could enter into force in 2024.

Notably, the Progress Report has been prepared by the OECD Secretariat and does not represent the consensus view of the OECD/G20 Inclusive Framework on BEPS.

In depth

As stated above, the Progress Report contains new building blocks of Amount A and various changes to building blocks that have been the subject of previous public consultations. The following points are worth highlighting:

  • Scope: In general, MNE groups with consolidated revenues of more than EUR 20 billion (revenue test) and a profit before tax margin of more than 10% (profitability test) are within the scope of Amount A (see our earlier client alert). Exceptions apply to MNE groups that operate in the extractives and regulated financial services. The Progress Report now completes the scoping provisions with newly presented rules on Segmentation. According to thereto, if an MNE group meets the revenue test but not the profitability test, Amount A may still apply to an individual segment reported in the consolidated financial statements of that MNE group. In order for a segment to be in scope, the segment itself must meet both the revenue test and the profitability test.
  • Revenue sourcing: Amount A seeks to allocate a portion of an in-scope MNE group’s residual profits to qualifying market jurisdictions. The draft model rules provide a detailed set of provisions on how to determine the jurisdiction in which revenues from a transaction arise, i.e., the market jurisdictions (see our earlier client alert). In general, specific indicators or default allocation keys serve as the basis to source revenues. The Progress Report has now introduced transitional revenue sourcing rules that can be applied during the first three years after the Multilateral Convention has entered into force. In general, the transitional rules offer the possibility to make use of certain allocation keys without having to consider the more specific indicators. This is a welcome reaction to certain feedback received from stakeholders in an earlier public consultation. The transitional rules should ease the compliance efforts faced by taxpayers when determining the relevant market jurisdictions for their business transactions.
  • Tax base determination: The draft model rules dealing with the tax base determination aim to calculate the Amount A “Adjusted Profit Before Tax” that will be partially reallocated to market jurisdictions (see our earlier client alert). The Progress Report now refines these rules and introduces some new elements. On the one hand, changes have been made to better align the tax base determination rules under Amount A with the calculation of GloBE income (or loss) for the purposes of Pillar Two. For example, the previously envisaged “Restatement Adjustment” has been replaced by its Pillar Two equivalent adjustment for “‘Prior Period Errors and Changes in Accounting Principles.” On the other hand, new adjustment items have been added, e.g., “Asset Fair Value or Impairment Adjustments” and “Asset Gain (or Loss) Spreading Adjustments.” As a result, there remain further deviations between Pillar One and Pillar Two that undoubtedly increase the complexity of the rules from the perspective of implementation and compliance efforts.
  • Marketing and Distribution Profits Safe Harbor: To some extent, MNE groups will source revenues from market jurisdictions in which they already have a physical taxable presence in the form of a subsidiary or permanent establishment. In such cases, the residual profit allocable to the market jurisdiction under Amount A will be reduced by the so-called Marketing and Distribution Profits Safe Harbor (MDSH). The rationale behind this concept is that a market jurisdiction should not receive a second taxing right of the MNE group’s residual profits. The Progress Report now includes the corresponding draft model rules for this newly defined element of Amount A. However, it is indicated that the suggested rules are subject to ongoing work at the OECD Secretariat.

To capture the amount of residual profits that are already taxed in the market jurisdictions due to an existing physical taxable presence, the currently proposed calculation of the MDSH takes into account a “Return on Depreciation and Payroll.” This return is then deducted from the so-called'”Elimination Profit”. While the calculation of this Elimination Profit is similar to that for the Adjusted Profit Before Tax that is subject to the Amount A rules, the fact that the two figures differ will bring additional complexity. The calculation of the Elimination Profit is even closer to the GloBE income (or loss) for the purposes of Pillar Two albeit with certain alterations (e.g., rules on stock-based compensation are optional under Pillar Two but compulsory under Pillar One) and additional elements. It is also notable that the calculation of the safe harbor potentially measures residual profits relating to activities wider than just marketing and distribution.

  • Elimination of double taxation: In its design, unlike Pillar Two, Amount A under Pillar One should not give rise to new tax revenues. It rather seeks to reallocate the residual profits of qualifying MNEs to certain qualifying jurisdictions. Therefore, while certain market jurisdictions are expected to gain tax revenues, there will be other jurisdictions that will be obliged to provide relief for Amount A taxation. The Progress Report now outlines how so-called ‘Relieving Jurisdictions’ will have to eliminate double taxation with respect to Amount A. This part of the Report presents another newly established building block that had not been previously published. However, again the draft model rules on this building block are still a work in progress.

The mechanism to determine which jurisdictions are responsible for eliminating double taxation and for which amounts follow a complex waterfall approach. First, jurisdictions that are considered relevant for the MNE group have to be clustered based on their respective levels of Elimination Profit. Second, certain of these jurisdictions with the highest Elimination Profits have to be categorized into different tiers (i.e., Tier 1 to Tier 3B) according to their Return on Depreciation and Payroll, on a scale from high to low. Last, the amount of relief for Amount A taxation is determined for every Tier of jurisdictions on a waterfall basis taking into account their Return on Depreciation and Payroll until the MNE group’s total Amount A Profit is covered.

  • Digital services taxes: As stated above, work on the remaining building blocks of Amount A (i.e., Withholding Taxes, Unilateral Measures and Administration) is underway but not yet completed. However, the Progress Report already indicates a preliminary definition of what constitutes a digital services tax or similar relevant measure that should be withdrawn once the Multilateral Convention enters into force. In particular, the required withdrawal will apply to measures:

“[…] provided they impose taxation based on market-based criteria, are ring-fenced to foreign and foreign-owned businesses, and are placed outside the income tax system (and therefore outside the scope of tax treaty obligations)”.

This definition would, therefore, also include taxes such as diverted profits taxes. However, it is stated that the withdrawal commitment “would not include value-added taxes, transaction taxes, withholding taxes treated as covered taxes under tax treaties, or rules addressing abuse of the existing tax standards.”


With the publication of the Progress Report, the complexity of Amount A has considerably increased. While the new rules on Segmentation seem practical, the calculation of the Marketing and Distribution Safe Harbor and the mechanism for Elimination of Double Taxation would present significant challenges for in-scope MNE groups.

We are currently analyzing the Progress Report in more detail to assess the specifics of the new rules, particularly on the topics of elimination of double taxation, and to identify further changes compared to previous versions. Look out for additional client alerts with further analysis over the coming weeks.


Richard Fletcher heads the UK Transfer Pricing Group in London. A seasoned professional with over 30 years of experience as an international tax adviser, he has published a number of articles in various tax technical journals. Richard has presented at the International Tax Review’s Global Transfer Pricing Conference for a number of years and at meetings of tax directors of UK multinationals for the UK branch of the International Fiscal Association.


Vladimir Zivkovic is a Counsel in Baker McKenzie Amsterdam’s Transfer Pricing team. He has 10+ years of experience in transfer pricing and value chain analysis. Vladimir started his career in Canada in 2008 and relocated to the Netherlands in 2011.


Konstantin Sakuth is a member of the Transfer Pricing team in the Dusseldorf office of Baker McKenzie. Prior to joining Baker McKenzie in February 2021, he worked in the tax practice of a major international law firm for more than three years.

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