Before 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 could include liquidity risk and credit risk. These risks should be analysed taking into account the short-term nature of the credit and debit positions within the cash pooling arrangement (see paragraph 10.123).
TPG2022 Chapter X paragraph 10.125
Posted on | By OECD
Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter X: Transfer Pricing Aspects of Financial Transactions | Tag: Cash pool, Delineation, Economically significant risks, Financial benefit, Financial transactions, Group synergies, Synergies, Treasury functions
« Prev |
Next » Related Guidelines
- TPG2022 Chapter X paragraph 10.126 Liquidity 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 offsetting of the credit and debit positions...
- TPG2022 Chapter X paragraph 10.127 Credit risk refers to the risk of loss resulting from the inability of cash pool members with debit positions to repay their cash withdrawals. From the cash pool leader’s perspective, there needs to be a probability for it to incur losses derived from the default of cash pool members with...
- TPG2022 Chapter X paragraph 10.122 Another 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. It would usually be appropriate to consider...
- TPG2022 Chapter I paragraph 1.72 Risks can be categorised in various ways, but a relevant framework in a transfer pricing analysis is to consider the sources of uncertainty which give rise to risk. The following non-exclusive list of sources of risk is not intended to suggest a hierarchy of risk. Neither is it intended to...
- TPG2022 Chapter X paragraph 10.123 One 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 to be a short-term, liquidity-driven arrangement, it...
- TPG2022 Chapter X paragraph 10.146 It 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 to debit and credit position within the...
- TPG2022 Chapter X paragraph 10.121 An advantage of a cash pooling arrangement may be the reduction of interest paid or the increase of interest received, which results from netting credit and debit balances. The amount of that group synergy benefit, calculated by reference to the results that the cash pool members would have obtained had...
- TPG2022 Chapter X paragraph 10.110 In the context of this section, cash pooling is the pooling of cash balances as part of a short- term liquidity management arrangement. Cash pool arrangements are complex contracts which may involve controlled and uncontrolled transactions. For instance, one common structure is that the participating members of the MNE group...
- TPG2022 Chapter X paragraph 10.147 As part of the cash pooling arrangement, cross-guarantees and rights of set-off between participants in the cash pool may be required. This raises the question of whether guarantee fees should be payable. It will always be appropriate to consider the particular facts and circumstances in any situation but there are...
- TPG2022 Chapter IX paragraph 9.21 A second example relates to the purported transfer of credit risk as part of a business restructuring. The analysis under Section D. 1.2.1 of Chapter I would take into account the contractual terms before and after the restructuring, but would also examine how the parties operate in relation to the...