Where a cash pool leader is carrying on activities other than coordination or agency functions, the pricing of such transactions would be adjusted appropriately. Under these circumstances, the cash pool leader’s remuneration as a service provider will generally be limited. A cash pool leader may perform no more than a coordination or agency function with the master account being a centralized point for a series of book entries to meet predetermined target balances of pool members. The appropriate reward of the cash pool leader will depend on the functions performed, the assets used and the risks assumed in facilitating a cash pooling arrangement. Rather, the cash pool member is likely to be participating in providing liquidity as part of a broader group strategy, in which the member can have a credit or debit position. According to the OECD, a cash pool is likely to differ from a straightforward overnight deposit with a bank in that a cash pool member with a credit position is not depositing money as a transaction with a view to a simple depositor return. As cash pooling is not undertaken regularly, if at all, by independent enterprises, the application of transfer pricing principles requires careful consideration. 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. In a typical physical pooling arrangement, the bank account balances of all the pool members are transferred daily to a single central bank account owned by the cash pool leader. 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. The Guidance is significant because it is the first time that the OECD’s Transfer Pricing Guidelines have been updated to include guidance on the transfer pricing aspects of financial transactions. In February 2020, the Organization for Economic Cooperation and Development (“OECD”) released Transfer Pricing Guidance on Financial Transactions (“Guidance”).
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