LUXEMBOURG Trends and Developments Contributed by: Peter Moons and Katerina Benioudaki, Loyens & Loeff
of an asset produces a loss which is accounted for the computation of GloBE income or loss. According to the OECD Commentary, this rule is intended to prevent MNEs from creating losses in a jurisdiction through sales or other transfers at prices that are not consistent with the arm’s length principle. Nevertheless, the rule does not apply if the loss is excluded from the constituent entity’s GloBE income or loss computation. Although the TP-related provisions of the Pillar Two Law seem straightforward to apply in prac - tice, they require complex calculations which, for the purposes of this article, will not be analysed. Pillar One Amount B Introduction Released in October 2020, the OECD/G20 Inclu - sive Framework (the “Inclusive Framework” ) on Base Erosion and Profit Shifting (BEPS) report on Tax Challenges Arising from Digitalisation – Report on Pillar One Blueprint ( “Pillar One” ) stated that Amount B was intended to simpli - fy and streamline the application of the arm’s length principle to baseline marketing and dis - tribution activities (the “Qualifying Activities” and “Amount B” ). On 19 December 2024, the OECD released a pricing tool and fact sheet to facilitate the under - standing and operation of the simplified and streamlined approach (the “S&S Approach” ) to TP. On 24 February 2025, the OECD published the consolidated report on Amount B incorporat - ing the updates released by the Inclusive Frame - work from February 2024 to December 2024 (the “Report” ). The Report provides guidance on an optional application of the S&S Approach to the Qualifying Activities. The S&S Approach pro - vides a pricing framework whereby a three-step process determines a Return on Sales (RoS) for in-scope distributors. Lastly, the Report also
provides guidance on documentation, transi - tional issues and tax certainty considerations. No minimum revenue threshold is applicable for the S&S Approach. Jurisdictions can choose to apply the S&S Approach for fiscal years begin - ning on or after 1 January 2025. The Report is incorporated in the OECD TP Guidelines for Multinational Enterprises and Tax Administrations (the “OECD Guidelines” ) as an The Qualifying Activities include the following: • buy-sell marketing and distribution transac - tions where the distributor purchases goods from one or more associated enterprises for wholesale distribution to unrelated parties; and • sales agency and commissionaire transac - tions where the sales agent or commission - aire contributes to one or more associated enterprises’ wholesale distribution of goods to unrelated parties. The Qualifying Activities are then subject to two further scoping rules: • the Qualifying Activities must exhibit econom - ically relevant characteristics meaning that they can be reliably priced using a one-sided TP method, with the distributor, sales agent or commissionaire being the tested party; and • the tested party in the qualifying transaction must not incur annual operating expenses lower than 3% or greater than an upper bound of between 20% and 30% of the tested party’s annual net revenues. Annex to Chapter IV. Scope of application However, the Qualifying Activities must not involve the distribution of non-tangible goods,
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