Corporate cash pool business as a cash management area, based on the principal loan to help enterprises create a group of funds allocated within the capital management solutions, in recent years quietly rising in the domestic market. With the cash pool bank as an intermediary, through financial Guiji, transfer, payment and other features, flexible financing to help enterprises reduce financial costs, optimize capital efficiency in the use of funds to help centralized management of enterprise groups is unique, fully meet the large-scale enterprise group of funds decentralized management to centralized management needs.
At present the cash pool has become the international capital centralized management of the Group one of the important tools, but in recent years, it was as a new financial product launched by the domestic banking market. Though an increasing number of group companies have been or are going to use the cash pool products, but after all the cash pool domestic product is still in relatively early stage, in practice involved in the process of laws and regulations there are still many gray zone. In the last issue of "corporate treasurer," we have the definition of the enterprise's cash pool to carry out the advantages of the cash pool, and the associated tax and policy issues described briefly. In this magazine, we will focus on the cash pool product compliance issues for further study.
Notional pooling is feasible in the country?
What is the name of the cash pool? Notional pooling, also known as virtual cash pool, the name suggests is the Group's internal funds is a virtual In doing together, and no substantial transfer. Cash pool in the name of each child by the bank to offset the credit balance account, the interest amount is the net position under the account structure to be calculated, the net position of banks to pay the deposit to the Group's interest or overdraft interest charged. The absence of the name of the cash pool between the different entities involved in the transfer of funds, to some extent simplify the operational procedures of banks and enterprises, save a lot of financial costs, further improve the enterprise capital management efficiency, so the advanced financial market, the notional pooling is a widely used mode of the cash pool.
General cash pool and compare the name of the cash pool diagram
In China, the name of the principle of the cash pool is not feasible. If the name of the cash pool implementation would encounter many policy issues.
The biggest challenge is the domestic interest rate control system strictly. As China's regulation on interest rates, bank deposit and lending rates are prescribed by the central banks and lending rates and deposit rates the difference between another in the international market at a relatively high level. If you use the name of the cash pool will lead to conglomerate deposits and overdrafts offset each other and not be charged overdraft interest on the loan, which is likely to conflict with the domestic interest rate policy.
Followed by the name of the cash pool will be involved in tax issues. As the cash pool loans each delegate must pay the stamp duty, using the name of the cash pool will not involve the actual transfer of funds to operational problems, so therefore enterprises need to pay stamp duty. In addition, the cash pool in the general mode, the sub-account payment of the entrusted loan sub-account for interest income and interest payments on the loan is to be commissioned by tax case by case basis, can not be netting settlement, enterprise groups, and as a basis for calculation and payment of business taxes and corporate income tax. But obviously the name of the cash pool to deposit interest and loan interest were written off, reducing the overall tax burden. This behavior is easily challenged by the tax department.
Also in the People's Bank, "General Rules on Loans" 第六十一条 clearly states: state enterprises shall not violate the regulations or a disguised loan financing business loan. Under the name of the cash pool deposits and advances written off this net settlement, led to legal entities within the Group, in the context of free trade, transfer of funds, contrary to the "General Rules on Loans" of the requirements.
Therefore, the existing legal framework and under the control of interest rate tax system, introduced on behalf of the domestic market to the cash pool can be said to be heavy resistance. But we should note that the name of the cash pool and netting as the international advanced and efficient cash management tool has been widely used. Currently, China's major banks are also eager to follow the example of the advanced experience of foreign countries, the introduction of notional pooling products. While domestic policies are not conducive to the promotion of the name of the cash pool, the banks in the development of these products when there are still some gray areas, but we can see that China's financial regulatory change is constant among the financial markets in the gradual relaxation of the stage, the corresponding domestic laws and regulations also are in progress, I believe the development with Chinese characteristics and the localization of cash management products is bound to become the future capital management trends.
Whether the combined levy of stamp duty?
According to China's tax law and the "Provisional Regulations of the PRC stamp duty" provision in the loan contract, the banks and other financial organizations and borrowers (not including bank lending) loan contracts signed by the borrower the amount of the 0.5 extreme decals, pay taxes people who sign a contract, documents used as a contract by contract decals.
Therefore, under the provisions of the entrusted loan must follow the extreme amount of each loan to pay stamp duty of 0.5, and transaction delivery time. Cash pool loans based on the principal mode is internal capital allocation. Which arise because of the entrusted loan stamp duty payable by the Group companies and its member companies agreed to pay side, generally paid by the lending side, the bank withheld.
Stamp duty in most cases occur each transaction or each must sign a contract to pay. But the cash pool is a more specific mode of commission loans. It is a bank as an intermediary, commissioned by the many to many loans. The cash pool, all sub-accounts are likely to be commissioned to provide loans or those commissioned by the demand for loans. In the cash pool structure, the sub-account funds on the program or according to the actual needs of enterprises to set a limit, the balance several times a day on the program. When the sub-account balance exceeding the target balance, it will be more than part of the deposit to the master account or the earliest return of the entrusted loan borrowing. Day if the payment of account balances of foreign subsidiaries less than the banks can provide their account of the funds on deposit home position limit of the overdraft amount paid on account by the mother finally returned to the commission of loan subsidiary, the banking system automatically mother account sub-account funds transfer to go to make up the overdraft amount.
Can be seen in the cash pool model, companies will have a large number of daily, frequent on the allocation of funds under the program and. Especially those relatively large-scale enterprise group, which have multiple sub-accounts, daily cash pool-based loans and the amount of commission occurred quite substantial. According to the commission before the said loans case by case basis if payment of stamp duty bound to consume a large amount of manpower and material resources, so that the coming of the cash pool to promote efficient cash management rationale.
In fact, early in the "Provisional Regulations of the PRC stamp duty" in the provisions of Article V there: stamp duty introduced by the taxpayer under the provisions of calculating the tax payable on their own, one affixed with revenue stamps to buy and (the decals) the payment method. To simplify the stamping procedures, a larger amount of tax payable or frequent stamping, taxpayers may apply the tax authorities, the adoption of a payment instead of stamping or a periodic payment method. As far as we understand, that in many enterprises have realized the frequent and complicated tax, in order to avoid stamp duty to be made each entrusted loan accounting, businesses are more common approach is to agree on a commission advance and bank loans, and then to the local tax department filed the application and record, by tax authorities, then the total amount to be calculated according to the stamp duty payable.
However, stamp duty in accordance with the provisions of gross not be reflected in the tax laws, and how enterprises and banks in the end to determine the total amount? Currently no related articles for reference. Then used to calculate the stamp duty amount to some extent, it is difficult to avoid the uncertainty of the total, may result in corporate tax underpayment or overpayment of stamp duty to happen, the same order as the basis for calculating the total stamp duty payable is not related tax benefit department supervision.
How to set the interest rate and the cash pool?
In the framework of the cash pool, sub-account to the master account for entrusted loans, to pay interest; contrast, sub-accounts entrusted loan to grant master account to earn interest. Entrusted loan payment sub-account sub-account for interest income and loan interest payments are to be commissioned by tax case by case basis, not netting settlement. Also commissioned loan interest income also must pay 5% of business income tax withheld by the bank. And at the end of the year when the interest income into taxable income, corporate income tax calculation.
Can be seen in the cash pool is to calculate the interest income and interest expenses business tax, an important basis for income tax. Then the interest income and interest expense is based on how an interest rate to be set?
There are unwritten rule, between the inter-bank business, then, should refer to the financial markets, commercial loan interest rates agreed upon inter-bank interest rates, not abnormally high or abnormally low. But here the so-called high or abnormally low not abnormal in the end is how a band then? Currently not have any specific explicit.
At present, we can look to the commission on how to determine the lending rates of the relevant notification file only the following department:
According to Central Bank "on the adjustment of bank deposit and lending rates notice required under the specific circumstances" (silver [1989] 40): entrusted loan interest rates from their clients to agree, but the maximum can not exceed the People's Bank's interest rate and floating rate loans over the same period.
According to "the interest rate on loans from financial institutions to expand the floating range of the Issues" (silver [2003] No. 250), since 2004, commercial banks, urban credit cooperatives extend loans interest rate floating range [0.9,1.7], which commercial banks urban credit cooperatives, the lower the interest rate on loans to customers as the base rate multiplied by the lower coefficient of 0.9, multiplied by the maximum limit for the benchmark rate coefficient of 1.7; rural credit cooperatives, the floating range of lending rates extended to [0.9,2], that is, lending rates in rural credit cooperatives lower limit for the benchmark interest rate multiplied by the coefficient of 0.9, multiplied by the maximum limit for the benchmark interest rate coefficient of 2.
In October 2004 the People's Bank deposit and lending interest rates go up it clear that financial institutions (excluding urban and rural credit cooperatives) in the lending rate will no longer set the ceiling.
So this way, the settings for the entrusted loan rates basically, there is no upper and lower limit. The cash pool, the actual interest rates used for business is agreed by the Group internal self-interest rate, in the process, banks generally will not intervene. But this does not mean that companies can freely set interest rates within the funds allocated. As far as we know, some companies adopted such a practice: if the lending companies have no financial liabilities, not provided for its lending limit, but not less than the same period demand deposits, interest rates, in order to avoid pay less business tax too, if the lending business itself has financial liabilities, its up loans may not be less than its borrowing costs, or they suspected of transfer pricing. Once the interest rate pricing suspected internal transfer pricing and thin capitalization would be related to the tax and auditing departments of the question.
Within the cash pool, the group can help each other enterprises entrusted loans, the lending interest rate by setting different levels of the interest income transferred to low-tax regions in sub-accounts. By setting the same high loan interest rates to high interest rates in the region occurred in the sub-account, this way it is easy to manipulate the level of the tax burden within the group. January 1 this year, the formal implementation of the corporate income tax law for such a similar situation on an ad hoc of the "Special Tax Adjustments" section, the tax treatment of related parties and other anti-avoidance measures made specific provisions to further improve and strengthen the enterprises and related parties of the provisions of the tax administration to prevent the use of related party transactions between related enterprises to achieve the profit-shifting. Another "Special Tax Adjustment Management Regulation (Trial)" also is expected to be introduced this year.
However, for a series of anti-avoidance measures enacted there are not perfect place. Article 46 of the new tax law provides: "enterprises received from related party debt investment and equity investment proportion of the prescribed criterion of interest, in the calculation of taxable income may not be deducted." But in the end is the standard What percentage? present there is no corresponding specific provisions. For those who already use the cash pool of enterprise groups, this standard will soon set up their business operations in the future an enormous impact.
Present in the domestic market, the cash pool products business has started off slowly, with the group companies increased capital intensive management trends, I believe this product will have good prospects for development. However, as China's financial markets to a strict financial controls, making the international advanced, sophisticated banking products are not able to play a really effective. The current legal provisions and agreement has not kept pace with the pace of product development cash pool. How to further regulatory reform, to relax restrictions on the appropriate policy, norms operating cash pool market and other issues are worthy of attention. I believe only in the advanced foreign management experience cash basis, combined with domestic environmental laws and regulations to better, compliance, promote the enterprise's cash pool products in the Chinese market applications.