Singapore Officially Adopts Amount B. What About Indonesia?
Choirunisa Nadilla, Meiliana
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Through the 8th edition of its e-Tax Guide, the Inland Revenue Authority of Singapore (IRAS) has officially adopted the Simplified and Streamlined Approach (SSA), which represents the implementation of Amount B as formulated by the OECD. The objective is to simplify the pricing of routine marketing and distribution activities carried out through qualifying related party transactions.
Amount B is part of Pillar One, alongside Amount A, which has been initiated by the OECD and G20 since 2016. Amount A is a mechanism designed to allocate a portion of multinational enterprises’ profits to market jurisdictions where consumers are located. However, the implementation has been slow due to opposition from the United States.
Meanwhile, Amount B aims to simplify and standardize the tax treatment of basic marketing and distribution functions, particularly for entities performing routine sales activities in local markets.
Unlike Amount A, which faces significant resistance, Amount B has gained broader acceptance. Several countries have begun incorporating this mechanism into their domestic rules, and even the United States started adopting related regulations in December 2024.
Singapore’s Pilot Implementation of Amount B
The pilot phase for implementing the SSA will officially run from 1 January 2026 to 31 December 2028. During this period, taxpayers may opt to apply the SSA as long as they meet the prescribed qualification criteria.
Taxpayers choosing to use the SSA are required to refer to Section 19 and Annex Chapter IV of the OECD Transfer Pricing Guidelines, titled “Special considerations for baseline distribution activities.”
IRAS also emphasizes that pricing analyses conducted under the SSA will be deemed to comply with the arm’s length principle. Once the pilot period ends, IRAS will assess whether the SSA should be permanently adopted.
Mitigating Double Taxation
However, the implementation of the SSA by taxpayers in Singapore does not automatically bind tax authorities in other jurisdictions where related parties are located. If double taxation arises due to differing treatments between Singapore and the partner country, taxpayers may seek resolution through the Mutual Agreement Procedure (MAP) under the applicable tax treaty (P3B).
Meanwhile, for taxpayers who choose not to apply the SSA, pricing must still be determined based on the arm’s length principle under the general transfer pricing rules. This includes the obligation to prepare TP Documentation if the transactions do not fall under any exemption category.
Singapore is one of the pioneering countries to integrate the SSA into its domestic transfer pricing framework. This step marks significant progress in the global effort to simplify the pricing of related party transactions under Pillar 1 Amount B.
Providing Legal Certainty
In principle, this reform aims to provide legal certainty for taxpayers in fulfilling their tax obligations related to related party transactions and to ensure that pricing practices remain consistent with the arm’s length principle.
Further, the adoption of the SSA also reflects IRAS’s commitment to offering a simplified mechanism that can reduce compliance burdens—one of the long-standing challenges in transfer pricing.
This approach also addresses several weaknesses of traditional comparability analysis, including the limited availability of comparable companies, inconsistent data quality across countries, and the high cost of annual benchmarking. With a more practical and consistent format, the SSA is expected to enhance certainty for taxpayers while improving efficiency for tax authorities.
Challenges and Limitations
Despite offering greater certainty, the implementation of the SSA is not without challenges.
First, the standardized margins are generic and global, meaning they may not fully reflect actual economic conditions in every industry or jurisdiction. Differences in competition levels, cost structures, and market dynamics, especially in developing countries like Indonesia and the broader ASEAN region, can result in Amount B margins that do not align with actual profitability.
This challenge becomes more significant amid rapid economic fluctuations driven by the pandemic, geopolitical shifts, commodity price volatility, and supply chain disruptions. In certain situations, even routine distributors may experience justifiable losses, something that is not fully accommodated under the standardized margins of Amount B.
Second, the application of the SSA still requires robust qualitative evaluation. Taxpayers must demonstrate that their transactions meet the criteria for baseline distribution activities, including not owning unique intangibles, not bearing economically significant risks, and not distributing commodities or digital goods. Therefore, even though the SSA is labeled as “simplified,” the documentation burden remains substantial.
Third, the OECD positions Amount B as an optional mechanism, which means adoption levels vary across jurisdictions. This may lead to policy fragmentation and new uncertainties, particularly for countries with high levels of cross-border transactions.
Although Amount B uses a one-sided method by setting standardized margins for routine distributors, this approach does not automatically eliminate differences in assessments between jurisdictions. The analysis still determines profit allocation across two countries, and partner jurisdictions may reject the standardized margin if it is deemed inconsistent with their traditional approach.
As a result, the risk of double taxation may still arise when one country applies the SSA while the partner country relies on traditional benchmarking. Such misalignment can hinder corresponding adjustments and open the door to transfer pricing disputes, meaning the effectiveness of Amount B ultimately depends heavily on cross-country acceptance.
Where Indonesia Is Heading
The question is, will Indonesia follow Singapore’s lead or take its own path in shaping future transfer pricing policies?
So far, Indonesia has not officially implemented Amount B. However, referring to the OECD Transfer Pricing Country Profiles, the Amount B policy is currently being considered and evaluated by the Directorate General of Taxes (DGT).
For the DGT, adopting Amount B could strengthen its ability to effectively monitor and enforce transfer pricing compliance. With this mechanism, the application of transfer pricing standards can become more practical without requiring significant financial or administrative resources.
If Indonesia considers adopting Amount B, adjustments to the Minister of Finance Regulation 172/2023 would be almost inevitable. This is because the current regulation is still entirely based on traditional benchmarking and the flexibility of tested party selection.
Therefore, regulatory harmonization will be essential to ensure Indonesia’s implementation of Amount B aligns with international standards. Let's wait for Indonesia's next step. (ASP/KEN)
Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.
