Tax News & Views International Weekly: Moving Ahead on Amount B

The 15% global minimum tax, recently given a new lease on life through the side-by-side agreement between the Organization for Economic Cooperation and Development and the United States, has a name which is likely to confuse future generations of tax students.

It’s still often called Pillar Two—but there will almost certainly be no Pillar One.

The policy was originally envisioned as part of a “Two-Pillar Solution,” a grand bargain that would satisfy many different countries with different revenue needs. As agreed-to in 2021, Pillar One would have allowed market jurisdictions to tax an extra slice of income from sales into their countries—whether they’re made through traditional stores or online. This was meant to address the original impetus for the whole project, the growing public and political anger over perceived nontaxation of the online economy.

But, as officials from the U.S. Department of the Treasury recently reiterated, the primary Pillar One plan is done for. Negotiators will have to go back to the drawing board to address the issue, as the Trump Administration deals with digital services taxes through tariffs and other trade measures.

Pillar Two isn’t the only part to survive, though. Pillar One was actually bifurcated into two parts, Amount A and Amount B. The latter aims to streamline the taxation of marketing and distribution transactions deemed to be routine, freeing up tax administration resources for lower-income countries while also providing corporations with new certainty.

Despite the overall death of Pillar One, Amount B is primed to become an enduring aspect of the tax system. While the multilateral instrument to formally add it to tax treaties likely won’t proceed, countries have already begun to look to it as a new transfer pricing method to use under existing laws.

The OECD recently updated its Amount B guidance, including a new Frequently Asked Questions page addressing several technical issues. Those include how to apply the formula to startup companies with short prior histories to include and how to consider intercompany debt. This demonstrates how far along many countries are in weaving Amount B into their existing tax systems.

In a sense, Amount B is part of the overall trend in international taxes towards formulaic proxies, over more difficult and time-consuming exercises in applying abstract principles to individual taxpayer circumstances. It is still largely theoretical, however. Whether it will become a practical tool for tax authorities—or a new level of complexity increasing rather than decreasing disputes–is something the world is waiting to find out.

Noteworthy Items This Week

Tariff Refunds Would Present Tax, Transfer Pricing Issues – Caleb Harshberger, Bloomberg Tax ($):

For example, Eide Bailly principal Chad Martin said, a company that distributed the cost of the tariff onto an overseas subsidiary might take the position that the refund should go to that entity.

“That’s challenging in itself, because that’s an entirely new intercompany transaction that would need to be characterized and explained, and it’s also just kind of economically or theoretically uncertain on whether that’s even appropriate in the first place,” he said Friday.

But tax authorities would likely scrutinize exactly where companies allocate refunds internally, and companies could find themselves stuck between jurisdictions that each think they’re entitled to the taxes owed on that income.

“The IRS could take the view to say, ‘That’s not third-party behavior,’” Martin said, but “you can bet that the foreign tax authority is going to take the opposite view of ‘Hey, we were bearing US domestic policy-related costs’ and that any refunds should therefore go back to the foreign jurisdiction.”

See more of Eide Bailly's coverage of the Supreme Court's monumental tariff decision here and here.

End Is in Sight for Multinationals' TCJA Transition Tax Payments – Amanda Athanasiou, Tax Notes ($):

When the TCJA introduced its one-time transition tax under section 965 on untaxed offshore earnings of specified foreign corporations, it permitted taxpayers to elect to make the payment in installments over eight years.

The option proved popular. Roughly 1,750 companies opted in to the installment plan, representing over half of the 3,200 companies that reported a net section 965 liability for the 2017 tax year, according to an undated IRS release on income statistics. Those liabilities topped $140 billion, with installment elections resulting in deferred payments of $126.5 billion, it says.

The tax rate on the deemed repatriation of accumulated offshore earnings was set by the TCJA at 15.5 percent on liquid assets and 8 percent on illiquid assets. Under the eight-year payment plan, 8 percent of the net tax liability was due in each of the first five installments, with 15 percent, 20 percent, and 25 percent due in the final three installments, respectively.

Where’s the Business Participation in the U.N. Tax Convention? – Nana Ama Sarfo, Tax Notes ($):

In September 2027 the U.N. General Assembly will vote on the terms of the U.N. Framework Convention on International Tax Cooperation and two early protocols developed by U.N. member states. Those protocols, which are being developed via an Intergovernmental Negotiating Committee, have received input from scores of stakeholders who have provided public comments on the committee’s work.

Many of the comments have come from governments, academia, as well as civil society and international organizations. One interest group has shown limited public engagement: the business industry. This reveals a missed opportunity, given that the two early protocols — addressing the taxation of income from cross-border services in a digitalized and globalized economy and the prevention and resolution of international tax disputes — will squarely affect multinationals. For example, the negotiating committee solicited comments in the summer of 2025 on the two early protocols and the framework convention itself. Of the dozens of comments it received, only four distinct business commentators answered.

Is the EU Tax List Creating a Competitiveness Problem? – Elodie Lamer, Tax Notes ($):

The second point raised by Hein Lundbek is that the defensive measures triggered by the EU tax list aren't direct sanctions on the listed countries but rather "tax penalties imposed by EU countries on their own businesses that have activities or investments in listed jurisdictions,” he wrote. “The rationale is that by making it costly for European businesses to operate there, the listed countries will be pressured into reform,” he added.

But businesses are then faced with a patchwork of measures that not only increases complexity but also “actively undermines the level playing field within the single market,” Hein Lundbek continued. A European group “with subsidiaries in Vietnam may face denial of tax deductions in one EU country, higher withholding taxes in another and no additional consequences in a third,” he wrote.

OECD, UN Should Align on Pro-Growth International Tax Reforms – Daniel Witt, Bloomberg Tax:

But why are two organizations doing what seems to be similar work? Are they ships in a deep fog, hurtling toward each other, in danger of a collision that could upend international tax norms?

While there does appear to be some rivalry in the two efforts, there are hopeful signs of cooperation as well—and an overriding need for each to continue their work, ideally with common aims that set a foundation for tax reforms encouraging growth and development.

The OECD has a Model Tax Convention, forums on tax transparency and harmful tax practices, and the Base Erosion and Profit Shifting framework. While the UN has less experience in tax overall, it also has a Model Tax Convention and several manuals on international taxation. Both organizations work on harmful tax practices, the digital economy, and cross-border services.

Public Domain Superhero of the Week

Every week, a new character from the Golden Age of Comics, who’s fallen out of use.

This week’s entry: Atomic Thunderbolt

Debut Year: 1946

Debut Publication: Atomic Thunderbolt #1

Origin Story: After surviving a professor's nuclear experiment, a former merchant marine used new superpowers to "save mankind from itself."

Superpowers: The Atomic Thunderbolt can survive a nuclear blast—which one day may come in handy—while also being able to fly and spontaneously create explosions.

Eide Bailly's International Tax Team and our affiliates at HLB, The Global Advisory and Accounting Network, stand ready to assist with your worldwide tax needs.

Tax News & Views International Weekly: Moving Ahead on Amount B

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Alex Parker