The Spanish Supreme Court rules on various aspects of cash pooling

The Spanish Tax Authorities (STA) initiated tax audit and investigation proceedings in relation to the consolidated tax group, where they analysed the multinational enterprise’s centralised cash management (commonly known as cash pooling) system, assessed under the comparable uncontrolled price (CUP) method.

Automatic end of day sweeping of bank accounts to a zero balance is the cornerstone of this system, which is structured with a pool leader and manager in the Netherlands and the other participating entities operating in both directions, as providers (surpluses) and borrowers (funding needs) of funds.

Accordingly, the market interest rates applicable to credit and debit positions are not symmetrical, and that spread remunerates the pool leader and manager.

The Supreme Court’s conclusions

In light of the 2022 edition of the OECD Transfer Pricing Guidelines, the STA challenged the operation of the foregoing system. In its Judgment 3721/2025, and in line with the Central Economic Administrative Tribunal and the National High Court, the Spanish Supreme Court holds as follows:

• The role of the pool leader. This is, strictly speaking, confined to the mere operational execution of low value-added administrative steps and tasks in relation to the funds or surpluses that the participants, as the sole owners, contribute to the cash pooling arrangement; consequently, it has no decision-making capacity. Likewise, in the words of the Supreme Court: "In addition to having neither generated nor possessing the economic (or legal) ownership of the channeled liquidity and not taking decisions, the leader entity also assumes no risks. The risk lies with the participating entities, while the managing entity remains outside it.". Therefore, the STA denies that the position of this leader/manager entity is equivalent to that of a financial institution.
• The group’s differing characterisation of the transactions is not appropriate. They must be characterised in the same manner. In the Supreme Court’s own words "the characterisation under which the amounts contributed are equated with deposits and those received by the participants are treated as loans is rejected. Within the cash pooling arrangement, only short-term loans granted by the participants (transactions between non-financial entities) take place, and in no event deposits”.
• Group credit rating, not that of the borrowing entity. If the scenario is bilateral, the borrower’s solvency and liquidity prevail; if it is a centralised treasury system with multiple group participants alternating between debtor and creditor positions, the mutualised structure creates synergies for the group as a whole. Accordingly, the analysis should be anchored in the group’s rating.
• The remuneration applied is incorrect. Transactions labelled as loans carry high interest rates, whereas the contributions, treated as deposits, are remunerated only marginally. This divergence in treatment shifts tax bases from the borrowing entities to the jurisdiction of the cash pooling leader entity (the Netherlands). Therefore, interest rate symmetry is required, and any asymmetry is rejected.

Cash pooling arrangements designed by groups must be planned and reviewed in light of the current transfer pricing and related party transactions framework and, in particular, the criteria set out in this judgment:

• The interest rates applied to amounts contributed and to amounts received by the participating entities be symmetrical.
• The credit rating applicable to the loan transactions be that of the corporate group, not that of the borrowing entity.

Osborne Clarke comment

In summary, through this ruling the Supreme Court sets out its position on significant issues concerning cash pooling. Its implications require a case-by-case analysis. In this regard, for cash pooling scenarios with similar circumstances, it would be advisable to assess their alignment with the approach adopted by the Supreme Court, in order to evaluate the potential impact and the effect of any possible tax adjustments.

The judgment does not address a key aspect of cash pooling: entities that are always debtors or always creditors vis-à-vis the pool leader. Accordingly, the risk of a potential recharacterisation remains a live issue and should be resolved in future decisions of the Supreme Court.