1. Distribution is a necessary function for MNE Groups in successfully realising the value created throughout the different stages of their businesses. In general, the concept of distribution is broad but, at least, encompasses the performance of core distribution activities.
2. Transfer pricing disputes with respect to baseline marketing and distribution arrangements may involve administrative challenges for tax administrations, especially of low-capacity jurisdictions, and result in a compliance burden for taxpayers. Those disputes may arise in relation to the accurate delineation of the arrangement. Disputes may also arise with respect to the pricing considerations of marketing and distribution arrangements, focusing on areas such as the selection of the transfer pricing method, the appropriateness of the benchmarking analysis (especially the identification and selection of non-domestic comparables) or, where necessary, how to make appropriate comparability adjustments.
3. The simplified and streamlined approach articulated in this guidance is grounded in Chapters I-III and takes into account Section E of Chapter IV of these Guidelines. It contains a simplified and streamlined approach to approximate an arm’s length outcome for in-scope baseline marketing and distribution arrangements. It seeks to facilitate compliance, prevent transfer pricing disputes from arising and help resolve those that do arise in a more efficient manner.
4. The simplified and streamlined approach should be regarded as a simplification measure for the pricing of in-scope distribution arrangements that draws from the general principles included in the remainder of these Guidelines. The guidance in this annex should not be regarded as a revision of those general principles, nor should it be used to interpret the application of the remainder of these Guidelines with respect to any transaction.