Tag: Cash pool

Cash pooling can be used to manage the multinational group’s cash position on a consolidated basis and concentrate the group’s cash in one place. A cash pool is normally administered by a group company which is to be referred as the cash pool leader.

Switzerland vs. A GmbH, 12 Sep. 2018, Administrative Court, Case No. SB.2017.00100

Switzerland vs. A GmbH, 12 Sep. 2018, Administrative Court, Case No. SB.2017.00100

A GmbH, based in Zurich, was a subsidiary of the D group operating mainly in the field of consumer electronics worldwide, headquartered in country E. A GmbH was primarily responsible for acquiring exploitation rights to … and other related activities. The D Group also owned company F in Land H, which was responsible for the global treasury and cash pooling of the Group. On December 1 2008 A GmbH had entered into an agreement with Company F for the short-term deposit of excess capital and short-term borrowing. Under the terms of the agreement, if the balance was in A GmbH’s favor, A GmbH would be credited interest based on the one-month London Interbank Bid Rate (LIBID) minus 6.25 basis points, but not less than 0.05%. Following an audit in relation to the tax periods of 1.4.2009-31.3.2010 and 1.4.2010-31.3.2011, the tax authorities took the view that the cash pool credit contains a proportion of long-term loans to company F and insofar ... Continue to full case
Germany vs Cash Pool GmbH, January 2018, BFH Case No. I R 74-15

Germany vs Cash Pool GmbH, January 2018, BFH Case No. I R 74-15

The German court concludes that a Cash Pool agreement must be clear and unambiguous both in substance and amount. And if only a minimum and maximum interest rate has been agreed the arm’s length standard is not met. Click here for translation BUNDESFINANZHOF Urteil vom 17-1-2018 I R 74-15 ... Continue to full case
Switzerland vs. A GmbH, 7 Dec. 2016, Administrative Court, Case No. SB.2016.00008

Switzerland vs. A GmbH, 7 Dec. 2016, Administrative Court, Case No. SB.2016.00008

The distinction between cash pool receivables and long-term loans. A GmbH is a group company of the global A-group. The A Group also includes company F Ltd, which is responsible for the global treasury and cash pooling of the A Group. In 2008, A GmbH entered into an agreement with F Ltd on the short-term deposit of excess liquidity and short-term borrowing (cash pool). Under the terms of the agreement, if the balance were in A GmbH’s favor, recievables would be credited interest based on the one-month London Interbank Bid Rate (LIBID) less 6 , 25 basis points, but at least 0.05%. The Swiss tax administration argued that a portion of the cash pool receivable had to be treated as a long-term loan bearing higher interest rates. The long-term loan was set to the minimum cash pool receivable balance of each fiscal year. The interest rate on the long-term loan was set to the Swiss „Safe Habor Rates“ according to ... Continue to full case
Norway vs. ConocoPhillips, October 2016, Supreme Court HR-2016-988-A, Case No. 2015/1044)

Norway vs. ConocoPhillips, October 2016, Supreme Court HR-2016-988-A, Case No. 2015/1044)

A tax assessments based on anti-avoidance doctrine “gjennomskjæring” were set aside. The case dealt with the benefits of a multi-currency cash pool arrangement. The court held that the decisive question was whether the allocation of the benefits was done at arm’s length. The court dismissed the argument that the benefits should accure to the parent company as only common control between the parties which should be disregarded. The other circumstances regarding the actual transaction should be recognized when pricing the transaction. In order to achieve an arm’s length price, the comparison must take into account all characteristics of the controlled transaction except the parties’ association with each other. While the case was before the Supreme Court, the Oil Tax Board made a new amendment decision, which also included a tax assessment for 2002. This amendment, which was based on the same anti-avoidance considerations, was on its own to the company’s advantage. Following the Supreme Court judgment, a new amended decision was made in 2009, which reversed the anti-avoidance decision for all three years ... Continue to full case
Poland vs CP Corp, September 2016, Supreme Administrative Court, Case No. II FSK 2299/14

Poland vs CP Corp, September 2016, Supreme Administrative Court, Case No. II FSK 2299/14

A 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 question was whether the taxation of interest payments made from the Polish company to the pool leader will apply art. 21 par. 3 of the Corporate Income Tax Act, as a result of which interest should be exempt from withholding tax, and if not – whether the taxation of the interest will apply art. 11 of the tax treaty between Norway and Poland. In this judgement the Court stated that the cash pool leader cannot be regarded as the owner of all receivables paid to the group account, because it is not entitled to dispose of the interest in its sole discretion. The judgement in this case is aligned with prior rulings of 11 June 2015, file ... Continue to full case
Poland vs. Corp. Aug. 2016, Supreme Administrative Court, Case No. II FSK 1097/16

Poland vs. Corp. Aug. 2016, Supreme Administrative Court, Case No. II FSK 1097/16

A Group had established a physical cash-pool where funds from participants was transferred to and from a consolidating account (cash pool). The Polish Supreme Administrative Court concluded that every agreement in which the lender is obligated to transfer ownership of a specified amount of funds to the borrower, and the borrower is obligated to return the amount and pay interest, even if obligations of the parties to the agreement are implicit, constitutes a loan agreement. 2016 Decision Click here for translation Polish Cash Pool 2016 2015 Decision Click here for translation Polish Cash Pool 2015 ... Continue to full case
Poland vs Cash Pool Corp, March 2016, Supreme administrative Court, Case No. II FSK 3666/13

Poland vs Cash Pool Corp, March 2016, Supreme administrative Court, Case No. II FSK 3666/13

In 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 the balances of current accounts of all the cash pool participants. The banking platform used by the Group for the purposes of Cash Pooling is operated by D. Bank (“DB”) based in Germany. The actual operation of the Cash pooling system will consist in automated transfers of positive balances existing on the accounts of participants of Cash pooling, including the applicant’s account at the end of the settlement day into the superior account of Leader. The Minister of Finance found that the role of Cash pool leader boils down to the management of cash that will flow from participants in the cash pooling system. It is the companies participating in this cash pool that can actually enjoy ... Continue to full case
Switzerland vs Corp, 16. Dezember 2015, Case No. SB-2015-00005

Switzerland vs Corp, 16. Dezember 2015, Case No. SB-2015-00005

A AG granted loans to group companies as part of a cash pooling system via the parent company. The Swiss tax administration found the interest insufficient, resulting in a hidden profit distribution. According to the Swiss rules and doctrine, transactions between related parties must be consistent with the arm’s length principle. For the third-party comparison, the Court relied on the long-term interest rates, even if the cash pool balances were correctly accounted for as short-term loans. The basis for the third-party comparison for the cash pool interest rate was determined to be the market interest rate measured on the 5-year SWAP rate. The Court decision was partial approval of A AG and refusal to the Tax administration. Click here for translation Swiss SB.2005.00005 ... Continue to full case
Poland vs Cash Pool Corp, Warsaw Administrative Court, Case no II-FSK-1518-13

Poland vs Cash Pool Corp, Warsaw Administrative Court, Case no II-FSK-1518-13

In 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 the balances of current accounts of all the cash pool participants. The banking platform used by the Group for the purposes of Cash Pooling is operated by D. Bank (“DB”) based in Germany. The actual operation of the Cash pooling system will consist in automated transfers of positive balances existing on the accounts of participants of Cash pooling, including the applicant’s account at the end of the settlement day into the superior account of Leader. The Minister of Finance found that the role of Cash pool leader boils down to the management of cash that will flow from participants in the cash pooling system. It is the companies participating in this cash pool that can actually enjoy ... Continue to full case
Switzerland vs Corp, Oct. 2014, Federal Supreme Court, Case No. 4A_138-2014

Switzerland vs Corp, Oct. 2014, Federal Supreme Court, Case No. 4A_138-2014

Decision 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 states – If the terms of inter-company loans are not conforming to market conditions, then the payment qualifies as a distribution and a special reserve must be made in the balance sheet of the lender. The Court also states – It is questionable from the outset whether a participation in the cash pool, by which the participant disposes of its liquidity, can pass the market conditions test at all. Click here for translation Swiss case law 4A_138-2014 ... Continue to full case
Switzerland vs Swisscargo AG, Oct 2014, Federal Supreme Court, Case No 4A_138/2014

Switzerland vs Swisscargo AG, Oct 2014, Federal Supreme Court, Case No 4A_138/2014

Zero 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 in the form of cash pool arrangements must be agreed at arm’s length terms. Click here for translation Swiss Cash Pool 2014 ... Continue to full case
Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

Denmark vs. Bombardier, October 2013, Administrative Tax Court, SKM2014.53.LSR

The issue in the case was whether the applicable rates under the cash pool arrangement were on arm’s length, i.e. in accordance with the transfer pricing requirements. The Administrative Tax Court upheld most of the conclusions of the tax authorities. First, the Court found that the tax authorities were allowed to assess an arm’s length rate due to the lack of transfer pricing documentation. Second, the financial service fee of 0.25% was upheld. Third, the Court concluded that the rate on the short-term deposits and the corresponding loans (borrowed due to insufficient liquidity management) should be the same. The Administrative Tax Court observed that there was very little or no creditor risk on these gross corresponding loans/deposits because of the possibility of offsetting the balance. Hence, according to the Court, there was no basis for a spread on the gross balance. However, the rate spread on the net balance of the deposits was lowered from +1.18% to + 1.15%, equal ... Continue to full case
France vs. Sociétè Nestlé Finance , Feb 2013, CAA no 11PA02914 and 12PA00469

France vs. Sociétè Nestlé Finance , Feb 2013, CAA no 11PA02914 and 12PA00469

In the Nestlé Finance case, a cash pool/treasury activity was transferred to a related Swiss entity. The function had been purely administrative, carried out exclusively for the benefit of parties related to the French company. The French company did not receive any compensation for the transfer of the cash pooling activity. First the Administrative Court concluded that the transfer of an internal administrative function to a foreign entity – even if the function only involved other affiliated companies ‘captive clientele’ – required the payment of arm’s-length compensation. This decision was then appealed and later revoked by a decision of the Administrative Court of Appeals. Click here for translation France vs Nestlè Finance 5 feb 2013 CAA no 11PA02914 . . . Click here for translation France vs Nestlè Finance 5 Feb 2013 CAA no 12PA00469 ... Continue to full case
Portugal vs. Cash Corp, December 2012, Tribunal Case no 55/2012-T

Portugal vs. Cash Corp, December 2012, Tribunal Case no 55/2012-T

This case concerned the 2008 tax year, and the tax-payer was a company resident and incorporated in Portugal and a 100 percent subsidiary of a German company. The tax authorities assessed substantial corporate income tax because of a tax audit. The company claimed that the tax assessment violated the Portuguese transfer pricing regime because the tax authorities assumed that the company had provided a guarantee to its parent company, a related entity. However, according to the company, it could not be said that the subsidiary rendered a guarantee to its parent company under the cash-pooling agreement. The company also argued that the tax authorities were wrong in applying the comparable uncontrolled price method in order to obtain the arm’s-length price under the cash-pooling arrangement. The tax authorities in their answer stated that the contract between the parent and the subsidiary had clauses that deviated from a cash-pooling contract and they believed it should be deemed a mix of different contracts ... Continue to full case