Application of the Arm’s Length Principle to Physical Cash Pooling Arrangements in Light of the OECD Discussion Draft on Financial Transactions - Intertax View Application of the Arm’s Length Principle to Physical Cash Pooling Arrangements in Light of the OECD Discussion Draft on Financial Transactions by - Intertax Application of the Arm’s Length Principle to Physical Cash Pooling Arrangements in Light of the OECD Discussion Draft on Financial Transactions 47 4

Although cash pooling arrangements are one of the most important tools to facilitate efficient liquidity management within multinational enterprises (MNEs or group companies), the application of the arm’s length principle to these arrangements has not been sufficiently explored as yet. Against this background, this article critically discusses the transfer pricing aspects of physical cash pooling arrangements, especially in the light of the OECD’s recent Discussion Draft on Financial Transactions. Specifically, the article discusses the application of the arm’s length principle to cash pooling borrowings and deposits, guarantees issued in the context of the pooling arrangement, remuneration of the cash pool leader (CPL) as well as allocation of the cash pool benefit, in particular, the netting benefit and the volume discount. The authors also provide comments on the impact of the negative interest rate environment on cash pooling arrangements.

Intertax