Do we need a transfer pricing policy for our group cash pool?
If balances move between group companies and interest is credited or charged, there are intercompany transactions to price, whatever the treasury system calls them. The policy does not have to be long, but it does have to answer two questions. What function does the pool leader perform, and how are the rates applied to participants derived from that answer? A pool that has been running for years on rates nobody can explain is the common starting point, and the exposure is not only the rate itself: it is that no document exists saying who was entitled to what the pool produced.
Is our pool leader a service provider or a bank?
That is the question the analysis exists to settle, and it is settled on functions and risk rather than on the entity's name. A pool leader that matches balances, operates the accounts and passes interest through is performing a coordination function and earns a routine service reward. One that takes on genuine credit exposure to the participants and real liquidity risk, with the financial capacity to carry it, is doing more and is rewarded accordingly. Most treasury centres sit closer to the first description than the group assumes, which usually means a smaller retained margin, not a larger one.
Who gets the benefit that a cash pool creates?
This is the difficult question in a pool, not the rate. Netting surplus and deficit balances across the group produces a better overall position than each company acting alone, and that synergy has to be attributed to somebody. If the pool leader is only coordinating, it has not created the benefit and should not keep it, so the advantage belongs with the participants whose balances generated it. If the leader is bearing real risk, part of the benefit is its reward for doing so. Either way the allocation should be written down before the year closes, not reconstructed afterwards.
What interest rates should pool participants pay and receive?
The rates follow from the characterisation rather than the other way round. Once you have decided what the pool leader does and what risk it carries, you know how much of the spread between deposit and borrowing rates it is entitled to retain, and the participants' rates are set from there. Working in the opposite direction, by picking rates first and justifying them later, is what produces a pool where the leader keeps most of the spread while performing a coordination function. The supporting file should show the terms each participant could have obtained on its own before joining.
Does a notional pool need intercompany pricing at all?
It can. Where the bank aggregates balances for interest purposes and no money actually moves between group companies, there may be no intercompany loan to price, but there is still a benefit being created and shared, and there may still be guarantees or cross-undertakings supporting the arrangement. Start from the bank documentation: what has each participant agreed to, what is the pool leader's role in the structure, and how does the benefit reach the companies whose balances produced it? The conclusion may be that little needs pricing, but that is a conclusion to reach on the documents rather than assume.
Can a participant end up worse off by joining the pool?
It can, and that is worth testing, because an independent party would not join an arrangement that leaves it behind where it started. Compare what each participant receives on surplus balances and pays on deficits with what it could have obtained standing alone on its own credit. A company that lends into the pool at less than it could earn elsewhere, or borrows at more than it could obtain directly, is subsidising somebody. The analysis has to explain why a party at arm's length would accept that, and usually the honest answer is that it would not.
Do American citizens living abroad have to pay taxes?
American expats and green card holders need to file US returns for life, and many of them pay little or no US tax once the relief is applied — but the filing is what unlocks the relief, so the two questions have different answers. The exclusion for foreign earned income, the credit for foreign tax already paid and the treaty between the two countries between them usually leave the total at roughly the higher of the two countries' tax rather than the sum. Skip the return and none of it applies. See Americans abroad.
How do I actually stop being taxed twice?
In this order. Fix your residence under each country's own rules, and if both claim you, apply the treaty tie-breaker. Identify where each type of income is sourced. Read the article that covers that income type, because it decides who taxes and at what maximum rate. Then claim the relief on the residence-country return, with proof of the foreign tax. Most of the tax people lose to double taxation is lost at the last step, not the first. See how double taxation is relieved.
