When does a cash sweep become an intercompany loan?

When cash actually moves from one legal entity to another. A physical sweep or a zero-balance transfer between subsidiaries does not disappear into the group. The entity that gave up the cash is a lender. The entity that received it is a borrower. The balance has to be recorded, priced and documented. A notional pool does not move cash and does not create that loan.

How should an intercompany loan be priced?

The OECD's Chapter X says you delineate the real loan — amount, term, currency, seniority, security, covenants — and then price it as the borrower would have borrowed from an independent lender. The borrower's credit standing matters. Being part of a group can improve that standing through implicit support, and the OECD says that incidental benefit, by itself, does not require a fee. A formal guarantee from another group company is a different transaction and is priced separately. This page does not give a margin. The facility agreement and the local transfer-pricing file do.

Who owns the intercompany loan book?

Treasury usually originates it, because treasury decided to move the cash. Tax has to be able to defend the rate. Accounting has to carry the balance, the interest, and any foreign-exchange remeasurement. If no one owns the book, the sweeps continue and the loan agreements do not, which is the finding auditors and tax authorities both make.

Intercompany Loans in Treasury

An intercompany loan is what you have when one group company has the other's cash. A physical sweep does this every night. An in-house bank does it every time a subsidiary draws on the centre. Calling the balance "just a sweep" does not stop it being a loan. It stops anyone documenting it.

A notional pool is the opposite case. No cash moves, each entity keeps its balance, and there is no loan to administer. The design choice between the two is also a choice about whether you are willing to run a loan book.

What the loan actually is

Write the terms down, because a balance in a treasury worksheet is not an agreement:

Who lends and who borrows. Legal entities, not "the group".
How much, in which currency, for how long. An overnight sweep that is rolled every day for three years is a long-term loan that happens to reprice daily. Say which it is.
The rate, and what it is based on. A benchmark plus a margin, or a rate taken from the group's external facility. The basis has to be something you can show.
Security, seniority, and covenants, if any. An unsecured, subordinated, covenant-free advance is a different instrument from a mirror of the group's revolving credit. Price them differently or explain why you did not.
What happens if it is not repaid. A loan with no maturity and no demand right is a capital contribution wearing a loan's name. Tax authorities read it that way. So should you, before they do.

Balance-sheet FX hedging treats a foreign-currency intercompany loan as a monetary item that is retranslated. A loan that is in substance part of a net investment in a foreign operation is retranslated differently in the group accounts. Hedging one as if it were the other creates the mismatch the hedge was meant to remove. The classification is an accounting decision. Treasury needs it in writing before the hedge is put on.

What the OECD actually says about the rate

Chapter X of the OECD Transfer Pricing Guidelines, the 2020 financial-transactions guidance, is the text tax teams are holding. The parts that change treasury's behaviour:

Delineate the real transaction. "Treasury activities" is not a description. A centre that only coordinates external borrowing and on-lends it is doing a different job from a centre that takes credit risk.
The terms an independent lender would have set — type of loan, term, currency, security, covenants — are part of the price, not decoration around it (paragraph 10.76).
Implicit support is the benefit of being in the group. The Guidelines say that incidental benefit, arising only from group affiliation, does not require a payment or a comparability adjustment (paragraph 10.77). A formal guarantee from another group company is not implicit support. It is its own transaction.
How much support a subsidiary would actually get depends on how important it is to the group. An entity the group would not support is priced on its stand-alone rating (paragraph 10.78). A tool that stamps the group rating on every subsidiary, without that judgement, is not what the chapter describes.
A credit rating built from a public scoring tool is only as good as its inputs, and those inputs may themselves be distorted by other intercompany transactions (paragraphs 10.72 and 10.75). Do not treat the tool's output as a fact.

None of that is a margin. If a page, including this one, offers you "SOFR plus 150 basis points is arm's length", it is guessing.

The operating rule

Every sweep between legal entities posts to an intercompany account the same day. No month-end plug.
Each balance has an agreement, or it is on a list of balances that do not, with an owner and a date.
The rate is set by a written policy tax has signed, reviewed when the external facility is refinanced, not when the audit starts.
Interest is accrued and paid. A loan that never settles interest is the one that gets recharacterised.
Treasury, tax and accounting look at the same book. Three spreadsheets is how a balance exists in one of them and not the others.

What I left out, on purpose

Withholding tax, thin capitalisation and local safe harbours. They are statute. A treasury page that quotes one country's rule as if it were general is how the next country gets the wrong agreement.
A worked pricing example. The OECD chapter is explicit that the answer depends on the facts. An example with invented financials would be a false comparable.
Cash-pool reward for the header entity. Chapter X treats that separately from the loan. The pooling page is where the structure is chosen. This page is the loan the physical structure creates.

Move the cash if you need to. Then call the balance what it is, price it like a loan, and give it an owner.