## BPM7 Chapter 12. Primary Income Account: Annotated Outline ## Source details **Canonical URL:** [BPM7 Chapter 12. Primary Income Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-12.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-12.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-12.pdf.json) --- ### I. Overview of the Primary Income Account - Structure and content maintained from Balance of Payments and International Investment Position Manual, sixth edition (BPM6) Chapter 11. - Chapter will: - Introduce primary income and its main components. - Describe links to gross domestic product (GDP) and gross national income (GNI). - Distinguish primary income from secondary income. - Table 12.1: Overview of the Primary Income Account (structure retained). ### II. Types of Primary Income — coverage, timing, and valuation (Updates to BPM6) - General - Per GN B.9, income declared under tax amnesties should follow the accrual principle; adjustments from cash recording will need to be made. Reference to related discussion in other BPM7 chapters will be provided. - A. Compensation of Employees - No significant changes from BPM6. - B. Dividends and Withdrawals of Quasi-Corporations - Paragraph 11.27 on exceptional payments revised per GN D.17 and related Issue Note: - Concept of superdividends for foreign direct investment is to be discarded. - Any distributions of accumulated reserves from ordinary earnings will be treated as dividends. - Exceptional payments by corporations to shareholders made from sales of assets should not be treated as dividends. - A supplementary item may be added to separately identify payments from accumulated reserves for comparability with domestic superdividends, if feasible. - Corresponding changes to paragraph 11.30 on liquidating dividends. - C. Reinvested Earnings - Pending final outcomes of GN D.16, definition of retained earnings (paragraph 11.34) and discussion of reinvested earnings on direct investment enterprise (paragraphs 11.40–11.47) would be clarified. - Box 11.1 (Reinvested Earnings with Chain of Ownership) will be updated to reflect clarifications from D.16. - GN C.8 discussion: no agreement on whether fines and penalties should impact direct investment income when direct investment enterprises are responsible parties; the chapter will recommend compilers base determination on characteristics of the fine/penalty, including whether it is considered extraordinary. - Per GN F.2, a new paragraph will encourage supplemental reporting of retained earnings for portfolio investment and signal possible future expansion of retained earnings treatment to portfolio investment. - D. Interest and Similar Returns - Per GN IF.1 on Islamic Finance, the term “interest” will be replaced with “interest and similar returns” to cover interest-like returns on Islamic instruments; definition of interest updated accordingly. - Economies with significant Islamic financial activities will be encouraged to create a sub-category within interest and similar returns to present investment income for Islamic deposits, loans, and debt securities separately. - Section may refer readers to Chapter 26 of 2025 SNA on Islamic Finance for more detail. - Following Clarification Note CN.3 on negative interest rates, a paragraph will clarify that negative interest rates should be recorded as negative income receivable by investors (and payable by financial institutions). - Economies with significant negative-yielding deposits could consider an “of which” category showing negative interest income separately. - Per GN F.3 outcomes, update paragraph 11.69 on investment income accrued while securities are under reverse transactions: - If reverse transaction covers period when dividends/interest are payable for an on-sold security (manufactured dividends/interest), recommendation is to record positive credit in dividends/interest for the security lender and negative credit in dividends/interest for the security borrower (as shown in F.3, Annex II). - Numerical examples to be expanded: bonds issued at par, at discount, and at premium (drawing in part from Handbook on Securities Statistics Annex 1). - E. Investment Income Attributable to Policyholders in Insurance, Standardized Guarantees, and Pension Funds - Clarifications from SNA since 2008 SNA (SNA News & Notes 39/40, AEG 9/2014) on treatment of pension schemes will be reviewed to determine if BPM alignment is needed. - F. Rent - Pending discussions (GN D Z.6, AI.2, GN G.9, GN WS.14) there may be changes to definition and recording of rent in macroeconomic accounts. - Discussions on economic ownership and depletion of natural resources (GN WS.6), biological resources (GN WS.8), and renewable energy resources (GN WS.11) may have implications for BPM guidance on rent. - G. Taxes and Subsidies on Products and Production - Pending GN WS.7 outcomes, a new section may describe transactions for taxes on production related to emission permit trading schemes, including possible cross-border transactions where emission permits are purchased in one economy and surrendered in another. - Pending GN WS.14 outcomes, discussion of the borderline between taxes and service fees may be expanded/clarified and aligned across manuals. ### III. Investment Income and Functional Categories (Updates to BPM6) - Section retained from BPM6 with important changes: - Table 11.2 will be updated to reflect a new detailed breakdown of direct investment income following GN D.7 recommendations: - De-emphasize breakdown by investment relationship (direct investor in direct investment enterprise; direct investment enterprises in direct investor (reverse investment); between fellow enterprises) in favor of sectoral breakdown (see proposed table in Annex III of GN D.7). - Recommend disaggregation of investment income by characteristics of the trading enterprise (ownership and size) as a supplemental presentation per GN C.2 to highlight role of enterprises with different characteristics in the current account. - Supplemental presentation will be described further in Chapter 15, Globalization. - Detailed coverage components in section: - Direct investment income (with Box 12.5: Numerical Example of Calculation of Reinvested Earnings of a Direct Investment Enterprise). - Portfolio investment income. - Other investment income (Table 12.3: Detailed Breakdown of Other Investment Income). - Income on reserve assets. - Supplemental presentation of investment income by enterprise characteristics. ### Schematic Overview (structure and numbered elements) - I Overview of Primary Income Account - Definition - Links to GDP and GNI - Distinguishing primary income from secondary income - Structure of primary income account - Table 12.1 Overview of the Primary Income Account - II Types of Primary Income - A. Compensation of employees - B. Dividends and withdrawals from quasi-corporations - C. Reinvested earnings - Box 12.1 Reinvested Earnings with Chain of Ownership - D. Interest and similar returns - Box 12.2 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Par - Box 12.3 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Discount - Box 12.4 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Premium - Box 12.5 Numerical Example of Calculation of Interest Accrual on a Zero-Coupon Bond - Box 12.6 Numerical Example of Calculation of Interest Accrual on an Index-Linked Bond—Broad-Based Index - Box 12.7 Numerical Example of Calculation of Interest Accrual on an Index-Linked Bond—Narrowly Based Index - E. Investment income attributable to policyholders in insurance, standardized guarantees, and pension funds - F. Rent - G. Taxes and subsidies on products and production - III Investment Income and Functional Categories - Direct investment income - Box 12.5 Numerical Example of Calculation of Reinvested Earnings of a Direct Investment Enterprise - Table 12.2 Detailed Breakdown of Direct Investment Income updated to reflect sectoral breakdown in favor of investment relationship - Portfolio investment income - Other investment income - Table 12.3 Detailed Breakdown of Other Investment Income - Income on reserve assets - Supplemental presentation of investment income by enterprise characteristics ### References and Key Stakeholders Consulted (as cited) - Guidance notes and documents cited: GNs B.9, D.7, D.16*, D.17*, C.2, F.2*, F.3, G.9, IF.1, D Z.6, WS.6*, WS.7*, WS.8*, WS.11*, WS.14*, and AI.2; Clarification Note on The Statistical Treatment of Negative Interest Rates (CN.3); SNA News & Notes 39/40; AEG 9/2014 meeting decisions; Handbook on Securities Statistics. - Guidance notes under consultation at time of writing are marked with an asterisk (*). - Key stakeholders consulted: - System of National Accounts and Balance of Payments Manual editors. - IMF Statistics Department Financial Institutions Division and Government Finance Division. --- _Source: https://www.imf.org/-/media/files/data/statistics/bmp7/chapters/ao-bpm-ch-12.pdf_