TPG2022 Chapter X paragraph 10.138

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Category: OECD Transfer Pricing Guidelines (2022), TPG2022 Chapter X: Transfer Pricing Aspects of Financial Transactions | Tag: , , , , ,
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Company T, a member of MNE Group Y, performs as the MNE group treasury entity and undertakes a range of different financial transactions both intra-group and externally. Company T’s main purpose is to provide treasury services to the other entities within the MNE group including strategy and management of group liquidity. T is responsible for raising finance across the MNE group by issuing bonds or borrowing from third party banks and arranges intra-group loans to meet the funding needs of other group members as necessary.

Related Guidelines

TPG2022 Chapter X paragraph 10.139As part of the group liquidity arrangements, T operates an MNE group cash pooling arrangement and is responsible for deciding how to invest surplus funds or fund any shortfall. T sets the intra-group interest rates and is at risk for any differences between the rates it sets with other group...
TPG2022 Chapter X paragraph 10.41A key function of a corporate treasury may be, for example, to optimise liquidity across the MNE group to ensure that the business has sufficient cash available and that it is in the right place when it is needed and in the right currency. In general, efficient management of MNE...
TPG2022 Chapter X paragraph 10.135Under the cash management services agreement the bank makes any transfers necessary to meet the target balance for each pool participant with any net surplus deposited by M or any net overdrawn position being met by the bank lending to M. The facility that M may draw on is guaranteed...
TPG2022 Chapter X paragraph 10.126Liquidity 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 10.140The analysis under the guidance in Section D.1 of Chapter I indicates that the actual transactions should be accurately delineated as intra-group loans in the context of the treasury activities undertaken by Company T since Company T is performing functions and assuming risks that go beyond the coordination role of...
TPG2022 Chapter X paragraph 10.40The organisation of the treasury will depend on the structure of a given MNE group and the complexity of its operations. Different treasury structures involve different degrees of centralisation. In the most decentralised form, each MNE within the MNE group has full autonomy over its financial transactions. Decentralised treasury structures...
TPG2022 Chapter X paragraph 10.146It 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 10.141Accordingly, T should be compensated for the functions it performs and the risks it assumes in accordance with the guidance in Section C.1. This may include earning part or all of the spread between the borrowing and lending positions which it adopts....
TPG2022 Chapter X paragraph 10.142It should be borne in mind that the other group members which transact with T would still only do so if this left them no worse off than their next best option....
TPG2022 Chapter X paragraph 10.130In general, a cash pool leader performs no more than a co-ordination or agency function with the master account being a centralised point for a series of book entries to meet the pre-determined target balances for the pool members. Given such a low level of functionality, the cash pool leader’s...