{"id":8856,"date":"2026-05-29T11:00:56","date_gmt":"2026-05-29T09:00:56","guid":{"rendered":"https:\/\/www.altertax-avocats.com\/sister-company-treasury-agreement-tax-guide\/"},"modified":"2026-06-29T12:10:42","modified_gmt":"2026-06-29T10:10:42","slug":"sister-company-treasury-agreement-tax-guide","status":"publish","type":"post","link":"https:\/\/www.altertax-avocats.com\/en\/sister-company-treasury-agreement-tax-guide\/","title":{"rendered":"Sister company treasury agreement: tax guide"},"content":{"rendered":"\n \n

Cash Flow Agreement between Sister Companies: Legal and Tax Framework<\/h1>\n \n
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In corporate groups, centralized cash management is a major lever for financial optimization. Intra-group agreements<\/a> enable the organization of financial flows between related entities. Cash management agreements between sister companies meet specific needs for pooling financial resources within a single economic unit. <\/p>

You need to understand the legal and tax implications of these agreements to secure your practices. The tax authorities carefully examine the compliance of these agreements with the arm’s length principle. <\/p>

What is a cash flow agreement between sister companies?<\/h2>

A treasury agreement between sister companies is a contractual agreement organizing cash advances and loans between companies owned by the same parent company. These companies, known as “sister companies”, do not hold shares in each other, but belong to the same group. <\/p>

This agreement differs from conventional loans in that it is intra-group in nature and designed to optimize cash management. It falls within the broader framework of corporate group taxation<\/a>, and requires particular attention to documentation. <\/p>

Unlike management fee agreements<\/a>, which organize the provision of services, cash management agreements deal exclusively with financial flows. It enables a company with surplus cash to finance the temporary needs of a sister company. <\/p>

Features and mechanisms of the Convention<\/h2>

The mechanism is based on cash advances granted by one sister company to another. These advances may be one-off or form part of a permanent cash pooling arrangement at group level. <\/p>

Remuneration of flows is an essential element of the agreement. You need to provide for an interest rate in line with market conditions, generally based on a benchmark index (Euribor, \u20acSTR – Euro Short-Term Rate, or bank base rate) plus a margin reflecting the credit risk, to avoid any tax recharacterization. This rate must take into account several parameters: the duration of the advances, the borrower’s implicit credit rating, the group’s financing costs and current economic conditions. <\/p>

Various recognized methodologies can be used to determine the rate. The comparable open market price approach (UPC method, in line with OECD transfer pricing principles) involves identifying the terms and conditions that the borrowing company would obtain from a third-party bank. You can also use the Group’s weighted average cost of capital (WACC) or marginal cost of debt as a reference. In practice, an indicative range is generally between 3-month Euribor plus a margin of 1% and 3%, depending on the risk profile of the borrowing company. <\/p>

Practical details generally include :<\/p>