“XZ SA” is a Spanish parent of a tax consolidation group which is part of a multinational group. The Spanish group participates in the group’s cash pooling system, both as a borrower and as a provider of funds.
The objective of cash pooling agreements is to manage the cash positions of the participating entities, optimising the group’s financial results by channelling the excess liquidity of the group companies that generate it to the group companies that need financing, resorting to third-party financing when the group itself is not able to finance itself. This achieves greater efficiency in the use of the group’s funds, as well as improving their profitability and reducing the administrative and general financial costs of the entities participating in the agreement.
The tax authorities issued an assessment in which the interest rates on deposits and withdraws had been aligned and determined based on a group credit rating.
A complaint was filed with the TEAC by XZ SA.
Judgement of the TEAC
The TEAC dismissed the complaint and upheld the tax assessment.
The asymmetry in the treatment given by the taxpayer to credit and debit transactions in cash pooling is not admissible:
As this system is configured, both types of transactions should have the same treatment; The analysis of the logic and philosophy that exists in transactions with financial institutions is not transferable to the cash pooling transactions involved here; in this, transactions that are channelled through the leading entity of the cash pooling, it follows from the functional analysis that it acts as a service provider managing and administering the cash pooling, but not as a credit institution that would assume the consequences of the contributions and drawdowns to/from the cash pool. And all the companies that are part of the cash pooling can be either contributors or receivers of funds, without it being generally known a priori what the debit or credit position of each of them will be.
Reference is made to previous case law – TEAC, Case Rec. 6537/2017 and Supreme Court ruling of 5 November 2020 (appeal 3000/2018).Spain vs XZ SL 230322 TEAC