Financing & treasury
Cash pooling
Cash pooling is a treasury structure where group entities concentrate their surplus and deficit cash balances through a central account, reducing external borrowing costs and improving liquidity management, but from a transfer pricing perspective every participant's borrowing and deposit rate, plus the leader's remuneration.
Two common structures exist: physical pooling, where cash is actually swept between accounts, and notional pooling, where balances are merely offset for interest calculation purposes without funds moving. Both generate genuine synergy benefits for the group, and those benefits need a defensible, evidenced allocation across.
Tax authorities increasingly scrutinise cash pool leaders, asking whether they merely coordinate the mechanics or actually assume credit and liquidity risk warranting a treasury margin. Getting this wrong, or applying one blended rate to every participant regardless of credit standing, is among the most commonly challenged.
In practice
What matters when applying cash pooling
- Distinguish physical from notional pooling structures
- Price each participant individually, not with one blended rate
- Assess whether the leader bears genuine risk
- Allocate synergy benefits on a defensible basis
- Document the pool's mechanics and cash flows
Frequently asked
Common questions
What is the main transfer pricing risk in cash pooling?+
Applying a single blended interest rate to all participants regardless of their individual credit standing, rather than pricing each entity's borrowing or deposit position based on its own creditworthiness.
Does the cash pool leader earn a margin?+
Only if it performs genuine treasury functions and bears real credit or liquidity risk; a leader that merely administers the mechanics typically warrants a modest, routine service fee instead.
See how the tooling handles this in practice
Our transfer pricing tools calculate intercompany charges, benchmark financing and reconcile the intercompany ledger from your own data. Book a short walkthrough and we will show the workflow on a scenario that matches your group structure, rather than a generic demo dataset.