Special Cases
| Pages | 45-51 |
Page 45
8.1 Some types of enterprises or activities warrant special mention. The SIMSDI survey sought information on the treatment of a number of these special cases: namely, quasi-corporations arising from construction enterprises and the operation of mobile equipment; cross-border real estate transactions; transactions with offshore enterprises and Special Purpose Entities (SPEs); and the treatment of expenditure on natural resources exploration.
8.2 On occasion, an enterprise will produce goods and services outside its own economy but not establish a separate legal corporation in the host economy. According to the Benchmark and the BPM5, if (1) production is maintained for one year or more, (2) a separate set of accounts is maintained for the local activities, and (3) income tax is paid to the host country, a quasi-corporation that has a direct investment relationship should be established in the host country for balance of payments compilation purposes. This recommendation should be followed with regard to the activities of construction enterprises. A similar recommendation applies when an enterprise in one economy installs machinery and equipment in another economy. An enterprise that operates mobile equipment in another economy is considered to have a center of economic interest in the other economy if the operations are accounted for separately and are recognized by the tax and licensing authorities of the other economy as those of a separate enterprise. If these conditions are met, production should be attributed to the host economy in which such production occurs and should be treated as production of an enterprise having a direct investment relationship with the parent company that has established the operations in the host economy.
8.3 Table 8.1 gives the results of the 2001 SIMSDI update regarding the countries that include in their inward FDI transactions data the activities of quasi- corporations involving construction enterprises and mobile equipment (aircraft, ships, and drilling rigs) and compares these numbers with the situation in 1997. Tables 41 and 42 of Appendix I give the details by country for the inward and outward FDI transactions and position data.
Table 8.1. Quasi-Corporations Involving Construction Enterprises and Mobile Equipment
| Countries That Include in Their Inward FDI Transactions Data Activities of Quasi-Corporations Involving: | ||||
| Construction enterprises | Mobile equipment | |||
| Number of Countries | Aircraft | Ships | Drilling rigs | |
| Total 2001 (61) | 23 | 16 | 16 | 20 |
| Total 1997 (61) | 16 | 10 | 10 | 12 |
| Change | +7 | +6 | +6 | +8 |
| OECD 2001 (30) | 12 | 6 | 7 | 10 |
| OECD 1997 (29) | 7 | 4 | 5 | 6 |
| Other 2001 (31) | 11 | 10 | 9 | 10 |
| Other 1997 (32) | 9 | 6 | 5 | 6 |
Page 46
8.4 There has been some improvement in the number of OECD countries that include the activities of quasi-corporations in their inward FDI transactions data. Half of the OECD countries for which quasi- corporations involving construction enterprises and the operation of drilling rigs are applicable now include the activities of those quasi-corporations in their inward FDI transactions data-12 of the 24 countries for which quasi-corporations involving construction enterprises are applicable, and 10 of the 20 countries for which quasi-corporations involving drilling rigs are applicable. However, despite modest improvements since 1997, only about one-third of the 18 countries for which quasi-corporations involving the operation of aircraft or ships are applicable include those activities in their inward FDI transactions data-6 countries include the activities involving aircraft, and 7 include the activities involving ships. The numbers for the outward FDI transactions data and inward and outward FDI position data are similar.
8.5 Somewhat higher proportions of other IMF member countries include the activities of quasi- corporations in their inward FDI transactions data- 52 percent of the 21 countries for which quasi- corporations involving construction enterprises are applicable; 59 percent of the 17 countries for which quasi-corporations involving the operation of aircraft are applicable; 56 percent of the 16 countries for which quasi-corporations involving the operation of ships are applicable; and 59 percent of the 17 countries for which quasi-corporations involving the operation of drilling rigs are applicable. The numbers for the outward FDI transactions are similar, and those for the inward and outward FDI position data are somewhat lower.
4@Nonresident Ownership of Land and Buildings
8.6 All land and buildings located within an economy, except structures owned by a foreign government, must, by convention, be regarded as being owned by resident units. If the actual owner is a nonresident enterprise or individual, the ownership is deemed to have been transferred to a notional resident institutional unit that, in turn, is deemed to own the land and buildings. The nonresident has a financial investment in this notional unit, which is therefore treated as being a direct investment enterprise.
8.7 Table 8.2 shows the results of the 2001 SIMSDI update compared with the 1997 survey regarding the number of countries that include in their FDI transactions data the purchases and sales of land and buildings by nonresident enterprises and nonresident individuals. Table 8.2 shows that there have been significant improvements since 1997, affecting both the inward and outward FDI transactions data and both nonresident enterprises and nonresident individuals. Almost 90 percent of the 54 countries for which purchases and sales of land and buildings by nonresi- dent enterprises are applicable now include these transactions in...
To continue reading
Request your trial