The accurate delineation of the cash pooling transactions will depend on the particular facts and circumstances of each case. As cash pooling is not undertaken regularly, if at all, by independent enterprises, the application of transfer pricing principles requires careful consideration. As paragraph 1.11 notes “Where independent enterprises seldom undertake transactions of the type entered into by associated enterprises, the arm’s length principle can be difficult to apply because there is little or no direct evidence of what conditions would have been established by independent enterprises.”
TPG2020 Chapter X paragraph 10.115
Category: C. Treasury function, C.2. Cash pooling, OECD Transfer Pricing Guidelines (2017), TPG2020 Chapter X: Financial Transactions | Tag: Cash pool, Delineation of cash pooling arrangements, Financial transactions, Treasury functions
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- TPG2022 Chapter X paragraph 10.116The accurate delineation of cash pooling arrangements would need to take into account not only the facts and circumstances of the balances transferred but the wider context of the conditions of the pooling arrangement as a whole. For example, a cash pool is...
- TPG2022 Chapter X paragraph 10.117The cash pool member is likely to be participating in providing liquidity as part of a broader group strategy, an arrangement in which the member can have a credit or debit position, which may include among its aims a range of benefits that...
- TPG2022 Chapter X paragraph 10.111Although there are two basic types of cash pooling arrangements – physical and notional – other variations and combinations may be arranged to meet specific business needs. For example, a number of physical pools might be held, one for each currency in which...
- TPG2022 Chapter X paragraph 10.122Another key consideration in analysing intra-group funding arrangements which might be described as cash pooling are situations where members of an MNE group maintain debit and credit positions which, rather than functioning as part of a short-term liquidity arrangement, become more long term....
- TPG2022 Chapter X paragraph 10.125Before any attempt is made to determine the remuneration of the cash pool leader and participants, it is central to the transfer pricing analysis to identify and examine under Chapter I guidance the economically significant risks associated to the cash pooling arrangement. These...
- TPG2022 Chapter X paragraph 10.123One of the practical difficulties in such situations will be deciding how long a balance should be treated as part of the cash pool before it could potentially be treated as something else, for example a term loan. As cash pooling is intended...
- TPG2022 Chapter X paragraph 10.146It is expected that all cash pool participants will be better off than in the absence of the cash pool arrangement. Under prevailing facts and circumstances that could imply, for instance, that all cash pool participants would benefit from enhanced interest rates applicable...
- TPG2022 Chapter X paragraph 10.126Liquidity risk in a cash pool arrangement arises from the mismatch between the maturity of the credit and debit balances of the cash pool members. Assuming the liquidity risk associated to a cash pool requires the exercise of control functions beyond the mere...
- 2020: ATO Alert on arrangements and schemes connected with DEMPE of intangiblesThe ATO is currently reviewing international arrangements that mischaracterise Australian activities connected with the development, enhancement, maintenance, protection and exploitation (DEMPE) of intangible assets. Such arrangements may be non-arm’s length or structured to avoid tax obligations, resulting in inappropriate outcomes for Australian tax...
- Australian Treasury issues Consultation Paper on Multinational Tax Integrity and Tax TransparencyAs part of a multinational tax integrity package aimed to address the tax avoidance practices of multinational enterprises (MNEs) and improve transparency through better public reporting of MNEs’ tax information, the Australian Treasury issued a Consultation Paper in August 2022. This paper seeks...
Related Case Law
- Poland vs CP Corp, September 2016, Supreme Administrative Court, Case No. II FSK 2299/14A Polish company were planning to enter into a inter-group cash pooling agreement. The cash pooling operation were to be managed by a foreign bank, which would open a group account as a basic account for Norwegien parent company, the pool leader. The...
- Poland vs Cash Pool Corp, Warsaw Administrative Court, Case no II-FSK-1518-13In a request for a binding ruling, a Polish Company indicated that it was joining an inter-group Cash Pooling Agreement (“Agreement”) in which the leader was based in Luxembourg. Under the Agreement, the pool leader acts as a regional financial center and consolidates...
- Switzerland vs Corp, Oct. 2014, Federal Supreme Court, Case No. 4A_138-2014Decision on the criteria for the arm’s length test of interest rates on inter-company loans. This case i about intercompany loans created by zero balancing cash pooling and the funding of group companies by a group finance company. The Swiss Federal Supreme Court...
- Switzerland vs Swisscargo AG, Oct 2014, Federal Supreme Court, Case No 4A_138/2014Zero balancing/physical cash pooling involves a physical transfer of money from the accounts of individual group companies to the accounts of the group’s cash pooling company and risks can be considerable. Group companies participating ind the cash pool may loose there funds. Loans...