“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 ... Read more

No member of the pooling arrangement would expect to participate in the transaction if it made them any worse off than their next best option. The analysis of an MNE’s decision to participate in a cash pool arrangement should be done with reference to its options realistically available, taking into account that an MNE can obtain benefits as a member of the cash pool other than an improved interest rate (see paragraph 10.146) ... Read more

The 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 can only be achieved as part of a collective strategy involving the pool members, done for the benefit of all of the pool participants, and the membership of which is limited to entities within the MNE group. Pool participants deposit cash to the pool (or withdraw cash from the pool), and not to (or from) a particular cash pool member ... Read more

The 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 likely to differ from a straightforward overnight deposit with a bank or similar financial institution in that a cash pool member with a credit position is not depositing money as a transaction in isolation with a view to a simple depositor return ... Read more

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.” ... Read more

No member of the pooling arrangement would expect to participate in the transaction if it made them any worse off than their next best option. The analysis of an MNE’s decision to participate in a cash pool arrangement should be done with reference to its options realistically available, taking into account that an MNE can obtain benefits as a member of the cash pool other than an improved interest rate (see paragraph 10.146) ... Read more

The 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 can only be achieved as part of a collective strategy involving the pool members, done for the benefit of all of the pool participants, and the membership of which is limited to entities within the MNE group. Pool participants deposit cash to the pool (or withdraw cash from the pool), and not to (or from) a particular cash pool member ... Read more

The 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 likely to differ from a straightforward overnight deposit with a bank or similar financial institution in that a cash pool member with a credit position is not depositing money as a transaction in isolation with a view to a simple depositor return ... Read more

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.” ... Read more

“X Iberica SA” is a Spanish subsidiary of a multinational group and also a participant in the group’s cash pooling system, both as a borrower and as a provider of funds. When the group is not able to finance itself, the vehicle called THE X TES US comes into play, which raises these funds from outside the group as a group and on the basis of the group’s credit quality. 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 ... Read more