Cash pooling is a common treasury management tool employed by multinational enterprises to improve their cash management, simplify their bank account structures, and reduce overall bank transaction costs. Instead of each subsidiary having an independent bank relationship for its borrowing and depositing needs, cash pooling allows an MNE to transfer excess cash between subsidiaries and to offset negative cash balances. There are two main types of cash pooling: physical and notional. Companies must adhere to proper transfer pricing principles and guidance, such as those offered by the OECD’s recently published final guidance on transfer pricing actions of financial transactions, including guidance on cash pooling.
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Cash pooling is a common treasury management tool employed by multinational enterprises to improve their cash management, simplify their bank account structures, and reduce overall bank transaction costs. Instead of each subsidiary having an independent bank relationship for its borrowing and depositing needs, cash pooling allows an MNE to transfer excess cash between subsidiaries and to offset negative cash balances. There are two main types of cash pooling: physical and notional. Companies must adhere to proper transfer pricing principles and guidance, such as those offered by the OECD’s recently published final guidance on transfer pricing actions of financial transactions, including guidance on cash pooling.
If you are not a subscriber, subscribe now to read this content.
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