Amount B for Limited-Risk Distributors: OECD Ranges and Caveats

Amount B is the OECD’s attempt to end the comparables fight for the simplest fact pattern in transfer pricing: the limited-risk distributor or service provider that performs routine functions, owns no valuable intangibles and bears no significant risk. Instead of benchmarking each limited-risk entity against a pool, the 2022 OECD update prescribes a standardized routine return:

Amount B = a routine return in the range of 0.7% to 1.5% of net cost, with a median of 1.1%.

No pool. No Accept-Reject matrix. No working capital adjustment. The limited- risk entity is paid its standardized return, and the transaction is priced around it.

What “net cost” means

The denominator is the limited-risk entity’s full cost of performing the function, before its routine return:

Net cost = cost of goods sold + operating expenses
         + interest expense + depreciation & amortization

The routine return is then:

Routine return (Amount B) = net cost × 1.1%   (median; range 0.7%–1.5%)
Arm's length total cost   = net cost × (1 + 1.1%)

For a limited-risk reseller buying at ₹100 of net cost, the arm’s length resale price under the median is ₹101.10. The entire benchmarking exercise reduces to: is this entity actually limited-risk?

The comparability conditions

Amount B is not available by label — it is available by substance. The entity must sit inside the limited-risk profile:

Condition	What breaks it
No manufacturing or significant processing	Any production, formulation or assembly step
Minimal inventory risk	Large stock positions, long holding periods, obsolescence exposure
No significant marketing intangibles	Owned brand, customer relationships, key contracts
No R&D or product development	Even “minor” product adaptation can move the profile
No significant working capital or borrowing risk	Financing the group, material intercompany lending
Routine distribution/logistics functions only	Custom services, bespoke solutions, key account management with decision rights

The moment a function in the right-hand column appears, the entity is no longer the entity Amount B prices, and the return must come from an actual benchmark — TNMM in most cases.

Where Amount B applies

Two fact patterns are the design targets:

1. Limited-risk distributors/resellers — buy from the group, resell under the group’s brand, own no intangibles of value.
2. Low-complexity intragroup services — routine shared services and support where the service provider performs defined, low-value functions (the 2022 update extended Amount B to a standardized return for such services as well).

The appeal is procedural as much as substantive: the limited-risk entity’s pricing no longer needs a fresh comparables study every year, the counter-jurisdiction’s examination no longer revolves around a pool the authority dislikes, and the file documents the profile rather than a matrix.

Why Amount B fails in India — and what sits in its place

Amount B is an OECD construct. Indian law does not codify it, and that changes the practical picture:

• The TPO works to Rule 10B methods. An Indian file that prices the limited-risk reseller at “1.1% of net cost” without a Rule 10B benchmark is a file the TPO can reject: the methods prescribed in Rule 10B (CUP, resale price, cost plus, UCPM, TNMM, profit split) all contemplate a comparable reference, and the TPO will substitute TNMM on the Indian party and apply its own pool.
• The arm’s length range usually does not sit at Amount B. Indian distributor benchmarks under TNMM (OP/Sales) and GMM routinely price above a 0.7–1.5% net-cost return once working capital, inventory and credit are inside the cost base. A file that argues “Amount B says 1.1%” while its own pool says 3–4% is arguing against its own benchmark.
• India’s own standardized returns are the safe harbours. Where India prescribes a fixed return for a routine fact pattern, it does so in Rule 10TD — the safe harbour regime (ITeS, software, KPO, intra-group loans, corporate guarantees, low-value- adding services) — elected via Form 3CEFA. That is the Indian equivalent of what Amount B does for the OECD: a prescribed return that ends the comparables fight, with the certainty that comes only from the authority itself having set the number.
• Correlative acceptance is not guaranteed. Amount B’s other jurisdiction (where the supplier sits) may accept the limited-risk return while India does not — the result is double taxation of the spread, not a method disagreement.

The practical rule

• OECD-jurisdiction file, genuinely limited-risk profile: Amount B is a defensible, low-risk choice — and it is the first thing a counter-jurisdiction will cite against you if you benchmark below the range.
• Indian file: price the limited-risk entity under TNMM/GMM with a real pool, and use the safe harbour where the transaction qualifies. Treat Amount B as a floor argument — evidence that the booked return is at least within the OECD routine band — not as the method.

See also

• Limited-risk distributor benchmarking
• India safe harbours — Rule 10TD
• Methods overview