Tag: Notional cash pooling

TPG2022 Chapter X paragraph 10.114

With no physical transfers of funds, the transactional costs of operating a notional pool are likely to be less than transactional costs of operating a physical pool. Functions carried out by the bank would be accounted for in the charges or interest rate of the bank. With minimal functions carried out by the pool leader (because functions are primarily performed by the bank), there will be little, if any, value added by the pool leader to be reflected in the intra-group pricing. An appropriate allocation of the benefit created as a result of the elimination of the bank spread and/or the optimisation of a single debit or credit position would need to consider the contribution or burden of each pool participant ... Read more

TPG2022 Chapter X paragraph 10.113

In a notional cash pool, some of the benefits of combining credit and debit balances of several accounts are achieved without any physical transfer of balances between the participating members’ accounts although the bank will usually require cross-guarantees from pool participants to enable the right to set off between accounts if necessary. The bank notionally aggregates the various balances of the individual accounts of participating members and pays or charges interest according to the net balance, either to a designated master account or to all participating accounts under a formula determined in the cash pooling agreement ... Read more

TPG2022 Chapter X paragraph 10.111

Although 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 the business operates, along with a notional pool which then combines those individual currency pools ... Read more

TPG2022 Chapter X paragraph 10.109

The use of a cash pool is popular among multinational enterprises as a way of achieving more efficient cash management by bringing together, either physically or notionally, the balances on a number of separate bank accounts. Depending on the particular arrangements in place, a cash pool can help to achieve more effective liquidity management, whereby reliance on external borrowing can be reduced or, where there is a cash surplus, an enhanced return may be earned on any aggregated cash balance. Financing costs may also be reduced by eliminating the bank spread embedded in the interest which would be payable or receivable on a number of separate debit or credit account balances and by reducing banking transaction costs ... Read more

TPG2020 Chapter X paragraph 10.114

With no physical transfers of funds, the transactional costs of operating a notional pool are likely to be less than transactional costs of operating a physical pool. Functions carried out by the bank would be accounted for in the charges or interest rate of the bank. With minimal functions carried out by the pool leader (because functions are primarily performed by the bank), there will be little, if any, value added by the pool leader to be reflected in the intra-group pricing. An appropriate allocation of the benefit created as a result of the elimination of the bank spread and/or the optimisation of a single debit or credit position would need to consider the contribution or burden of each pool participant ... Read more

TPG2020 Chapter X paragraph 10.113

In a notional cash pool, some of the benefits of combining credit and debit balances of several accounts are achieved without any physical transfer of balances between the participating members’ accounts although the bank will usually require cross-guarantees from pool participants to enable the right to set off between accounts if necessary. The bank notionally aggregates the various balances of the individual accounts of participating members and pays or charges interest according to the net balance, either to a designated master account or to all participating accounts under a formula determined in the cash pooling agreement ... Read more
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 ... Read more