## BPM7 Annex 4 — Remittances (Sections 1–2)

## Source details

**Canonical URL:** [BPM7 Annex 4 — Remittances (Sections 1–2)](https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/bpm7-annex-4-v7-remittances.pdf)

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### A. Economic concept of remittances and importance
- Remittances represent household income and other resources from non-resident institutional units arising mainly from the temporary or permanent relocation of people from their home economy to those other economies.
- They largely consist of funds and noncash items sent or given by individuals who have migrated to a new economy and become residents there, as well as the net remuneration of nonresident workers (border, seasonal, other short-term or remote workers who are employed in an economy in which they are not resident and local staff employed by embassies, consulates, and military bases, etc).
- Remittances include cash and non-cash items and can be sent through electronic or digital means (e.g. wire transfer, electronic funds transfers, mobile money wallets, digital wallets, and other applications), as well as through other informal channels, such as money or goods carried across borders.
- For many economies, remittances represent a sizable and stable source of funds that sometimes exceed official aid or financial inflows from direct investment.
- Remittances may have a significant impact on poverty reduction and can finance economic activity in recipient economies.
- The Manual and the International Transactions in Remittances Guide for Compilers and Users identify three main aggregates to measure remittances: i) personal remittances; ii) total remittances; and iii) total remittances and transfers to NPISH. No single BOP data item comprehensively captures transactions in remittances.

### B. Measures of remittances: aggregates, components, and arithmetic relationships
- Three main aggregates:
  - Personal remittances
  - Total remittances
  - Total remittances and transfers to nonprofit institutions serving households (NPISHs)
- Aggregates are cumulative measures compiled using BOP standard components and supplementary items; compilation and dissemination of remittances is encouraged but voluntary.
- Tabular definitions and component labels:
  - Total Remittances and Transfers to NPISHs: a+b+c+d+e+f
  - Total Remittances: a+b+c+d e f
  - Personal Remittances: a+b+c d
  - Components (labels shown in table):
    - a b C — Personal transfers (part of current transfers)
    - Remuneration of employees less taxes, social contributions, transport, and travel
    - Capital transfers between households
    - Social benefits
    - Current transfers to NPISHs
    - Capital transfers to NPISHs
  - Note: Personal transfers is a standard item; other items are supplementary.
- Personal remittances (definition and scope):
  - Personal remittances are defined as current and capital transfers in cash or in kind between resident households and nonresident households, plus remuneration of employees, less taxes and social contributions paid by nonresident workers in the economy of employment, less transport and travel expenditures related to working abroad (paragraph 12.27).
  - Includes all household-to-household transfers and the net remuneration of nonresident workers.
  - Household-to-household transfers appear within current or capital transfers as appropriate; personal transfers are a standard item in the transfer income account; capital transfers between households are a supplementary capital account item.
  - Gross remuneration of nonresident workers is recorded under “remuneration of employees”; to derive the personal remittances component, remuneration is adjusted by deducting taxes, social contributions, and transport and travel expenses of border, seasonal, and other short-term workers (these three deductions are supplementary items).
  - Social contributions are defined as “the actual or imputed contributions made by households to social insurance schemes to make provision for social benefits to be paid” (paragraph 12.32).
  - Personal remittances also include personal and capital transfers originating from individuals who are not migrant workers; earnings from provision of services to another economy are not included.
- Total remittances:
  - Total remittances are the sum of personal remittances and social benefits.
  - Social benefits include benefits payable under social security and pension schemes and may be in cash or in kind (paragraph 12.40).
  - Social benefits is a supplementary item in the BOP transfer income.
- Total remittances and transfers to NPISHs:
  - Includes total remittances and both current and capital transfers to NPISHs from any institutional sector of the sending economy.
  - Broad definition not closely linked to migration; includes private and official aid, cross-border sponsorship of educational and cultural activities (including scholarships).
  - Current transfers received by NPISHs and to NPISHs are supplementary items under transfer income; capital transfers received by NPISHs and to NPISHs are supplementary items under the capital account.
  - Identification of NPISHs in partner economies is challenging and makes compilation of debit transactions particularly difficult.
  - “Total remittances and transfers to NPISHs” is a supplementary item in the BOP statement.
- Key components required for compiling remittance items:
  1. Remuneration of employees — Earned income account, standard component
  2. Personal transfers — Transfer income account, standard component
  3. Travel and transport related to employment of border, seasonal, and other short-term workers — Services account, supplementary items
  4. Taxes and social contributions related to remuneration of employees — Transfer income account, supplementary items
  5. Remuneration of employees less related travel and transport expenses and taxes and social contributions — Earned income account (for remuneration of employees), standard component; Services account (for travel and transport expenses) and transfer income account (for taxes and social contributions), supplementary items
  6. Capital transfers between households — Capital account, supplementary item
  7. Social benefits — Transfer income account, supplementary item
  8. Current transfers to NPISHs — Transfer income account, supplementary item
  9. Capital transfers to NPISHs — Capital account, supplementary item
- Important relationships (exact formulas):
  - “Net” remuneration of employees (#5)= #1 minus the sum of #3 and #4
  - Personal remittances = #2 plus #5 plus #6
  - Total remittances= #2 plus #5 plus #6 plus #7
  - Total remittances and transfers to NPISHs = #2 plus #5 plus #6 plus #7 plus #8 plus #9

### C. Standard BOP components related to remittances
- Two BOP current account items that substantially relate to remittances:
  1. Remuneration of employees
     - Refers to income of border, seasonal, and other short-term workers employed in an economy where they are not resident and of residents employed by nonresident entities/employers (including remote workers).
     - Represents “remuneration in return for the labor input to the production process contributed by an individual in an employer-employee relationship with the enterprise.”
     - Recorded gross before taxes and other expenses incurred in the economy where the work is performed (or in the economy of employer in the case of remote workers).
     - For personal remittances derivation, a net measure of remuneration of employees is used (see paragraph A4.8).
  2. Personal transfers
     - Consist of all current transfers, in cash or in kind, made or received by resident households to or from nonresident households (paragraph 12.21).
     - Personal transfers are a subset of current transfers and cover all current transfers that are sent by households to households.
     - Defined independently of the source of income of the sending household, the relationship between households, and the purpose for which the transfer is made.
     - The term “personal transfers” replaced “workers’ remittances” in BPM6.

### D. Related transactions (non-remittance cross-border flows)
- Investment by migrants:
  - Migrants frequently invest in their economy of origin (bank deposits, portfolio investments, real estate, small enterprises); these are cross-border investments included in the financial account and are not remittances in the BOP framework.
  - In some cases investments can be vehicles for remittances (e.g., deposits accessible to relatives, joint accounts, real estate occupied by relatives without market rent, enterprises paying above-market incomes to relatives); when such patterns are known, imputed transfers or estimates can be made on the basis of aggregate transaction data and benchmarks.
- Travel:
  - Travel refers to acquisition of goods and services in an economy by visiting non-residents; acquisitions by border, seasonal, and other short-term workers in their economy of employment are included in travel (paragraph 10.89).
  - Travel excludes acquisition of valuables, consumer durables, and other consumer purchases included in general merchandise (paragraph 10.90).
  - Compilation of supplementary remittance definitions requires that travel expenses of border, seasonal, and other short-term workers be subtracted from remuneration of employees; separating travel related to employment from other travel may be difficult in practice.

### E. Concepts of residence, valuation, and time of recording
- Residence:
  - BOP and national accounts frameworks identify residents and nonresidents relative to each reporting economy; personal transfers and remittances are based on residence rather than migration status.
  - Residence of households is determined by center of predominant economic interest; guideline: being present for one year or more in a territory or intending to do so qualifies as resident (paragraph 4.117).
  - Short trips do not change residence; going abroad with intention to stay one year or longer does.
  - If a member of an existing household ceases to reside in the territory where the household is resident, the individual ceases to be a member of that household (paragraph 4.118).
  - Migrants going abroad to work become residents of the host economy (assuming plan to stay one year or longer) but can rejoin original household on return.
  - Specific guidelines exist for students, medical patients, ship crews, diplomats, military personnel, and civil servants employed abroad in government enclaves; regardless of length of stay, these groups are considered residents of the originating economy (paragraphs 4.120–4.123).
- Implications for remittance recording:
  - Transactions are recorded differently depending on the residence status of individuals in their host economy.
  - Border, seasonal, and other short-term workers are nonresident where they work and their gross income is recorded as “remuneration of employees.”
  - No BOP entries exist for wages of migrant workers who stay at least a year and thus are residents of the same economy as their employer; when such migrants send remittances to a household in another economy, these are recorded as “personal transfers.”
  - Nonresident employers (embassies, international organizations, nonresident companies, employers of cross-border remote workers) can have substantial impact on remittance data; when resident workers work for nonresident employers, their wages and other benefits are recorded as “remuneration of employees.”

### Section 2 — Residency, valuation, and recording details
- Residency, transfers, and reclassification:
  - A4.26: The distinction between a transaction and a reclassification of residence is important for the structure of the system, though the effect on the asset position of households and economies is much the same whether resources arrive through remittances or through migrants returning home.
  - Migrants returning to reside in their economy of origin who bring goods or own assets: the assets that migrants bring with them on return are excluded from balance of payments transactions and are not recorded as transfers.
  - When the residence of the owner changes but ownership does not, the change in assets (such as bank balances and real estate ownership) between economies is recorded as a reclassification in the IIP change, not a transaction.
  - A4.27: No special residency treatment is adopted for refugees; their residence changes from their home territory to the territory of refuge if they have stayed or intend to stay in their place of refuge for one year or more.
  - If refugees are considered residents in the country of refuge, then income funds they receive from nonresident entities are included in remittances, as are any income funds they send to nonresident households.
  - Note for data users: Users interested in understanding all contributions migrant workers make to origin households and economies should note potential misalignment between their data needs and balance of payments definitions and should make appropriate additional estimations.
- Remote workers and residency:
  - Remote workers are not resident in the economy of their employer (statement present in the source).
- Valuation principles:
  - A4.28: All valuations in the balance of payments framework are based on market values (see paragraph 3.68).
  - A4.29: Remuneration of employees comprises:
    - wages and salaries in cash,
    - wages and salaries in kind,
    - employers’ social contributions,
    - all forms of bonuses and allowances (see paragraphs 11.18–11.19).
  - All transactions in kind should be valued at current market prices, that is, the current exchange value.
  - A4.30: Transfers in kind should be valued at the market value of the goods or services provided to the recipient (see paragraphs 3.71–3.72).
  - The valuation of cash transfers is clear, while transfers of other financial assets should be recorded at market value.
- Timing and recording:
  - A4.31: Remuneration of employees is recorded on an accrual basis (see paragraph 11.16).
  - Transfers are recorded on an accrual basis (discussed in paragraph 3.50).
  - In the case of voluntary transfers, accrual and settlement are often identical (see paragraph 3.52 for details on time of recording of transfers).
  - Involuntary transfers (such as taxes or alimony) should, in principle, be recorded when accrued, though this can be difficult in practice.
  - Remittances are mostly voluntary transfers.

*Source: International Monetary Fund — BPM7 Annex 4 Remittances, Sections 1–2.*

### Section 1

### Annex 4 Remittances — Section 1

### A. Economic concept of remittances and importance
- Remittances represent household income and other resources from non-resident institutional units arising mainly from the temporary or permanent relocation of people from their home economy to those other economies.
- They largely consist of funds and noncash items sent or given by individuals who have migrated to a new economy and become residents there, as well as the net remuneration of nonresident workers (border, seasonal, other short-term or remote workers who are employed in an economy in which they are not resident and local staff employed by embassies, consulates, and military bases, etc).
- Remittances include cash and non-cash items and can be sent through electronic or digital means (e.g. wire transfer, electronic funds transfers, mobile money wallets, digital wallets, and other applications), as well as through other informal channels, such as money or goods carried across borders.
- For many economies, remittances represent a sizable and stable source of funds that sometimes exceed official aid or financial inflows from direct investment.
- Remittances may have a significant impact on poverty reduction and can finance economic activity in recipient economies.
- The Manual and the International Transactions in Remittances Guide for Compilers and Users identify three main aggregates to measure remittances: i) personal remittances; ii) total remittances; and iii) total remittances and transfers to NPISH. No single BOP data item comprehensively captures transactions in remittances.

### B. Measures of remittances
- Three main aggregates:
  - Personal remittances
  - Total remittances
  - Total remittances and transfers to nonprofit institutions serving households (NPISHs)
- These aggregates are cumulative measures compiled using BOP standard components and supplementary items; compilation and dissemination of remittances is encouraged but voluntary.
- Tabular definitions (as presented):
  - Total Remittances and Transfers to NPISHs: a+b+c+d+e+f
  - Total Remittances: a+b+c+d e f
  - Personal Remittances: a+b+c d
  - Components (labels shown in table):
    - a b C — Personal transfers (part of current transfers)
    - Remuneration of employees less taxes, social contributions, transport, and travel
    - Capital transfers between households
    - Social benefits
    - Current transfers to NPISHs
    - Capital transfers to NPISHs
  - Note: Personal transfers is a standard item; other items are supplementary.

- Personal remittances (definition and scope):
  - Personal remittances are defined as current and capital transfers in cash or in kind between resident households and nonresident households, plus remuneration of employees, less taxes and social contributions paid by nonresident workers in the economy of employment, less transport and travel expenditures related to working abroad (paragraph 12.27).
  - Includes all household-to-household transfers and the net remuneration of nonresident workers.
  - Household-to-household transfers appear within current or capital transfers as appropriate; personal transfers are a standard item in the transfer income account; capital transfers between households are a supplementary capital account item.
  - Gross remuneration of nonresident workers is recorded under “remuneration of employees”; to derive the personal remittances component, remuneration is adjusted by deducting taxes, social contributions, and transport and travel expenses of border, seasonal, and other short-term workers (these three deductions are supplementary items).
  - Social contributions are defined as “the actual or imputed contributions made by households to social insurance schemes to make provision for social benefits to be paid” (paragraph 12.32).
  - Personal remittances also include personal and capital transfers originating from individuals who are not migrant workers; earnings from provision of services to another economy are not included.

- Total remittances:
  - Total remittances are the sum of personal remittances and social benefits.
  - Social benefits include benefits payable under social security and pension schemes and may be in cash or in kind (paragraph 12.40).
  - Social benefits is a supplementary item in the BOP transfer income.

- Total remittances and transfers to NPISHs:
  - Includes total remittances and both current and capital transfers to NPISHs from any institutional sector of the sending economy.
  - Broad definition not closely linked to migration; includes private and official aid, cross-border sponsorship of educational and cultural activities (including scholarships).
  - Current transfers received by NPISHs and to NPISHs are supplementary items under transfer income; capital transfers received by NPISHs and to NPISHs are supplementary items under the capital account.
  - Identification of NPISHs in partner economies is challenging and makes compilation of debit transactions particularly difficult.
  - “Total remittances and transfers to NPISHs” is a supplementary item in the BOP statement.

### Key components and arithmetic relationships (Table A4.2)
- Components required for compiling remittance items:
  1. Remuneration of employees — Earned income account, standard component
  2. Personal transfers — Transfer income account, standard component
  3. Travel and transport related to employment of border, seasonal, and other short-term workers — Services account, supplementary items
  4. Taxes and social contributions related to remuneration of employees — Transfer income account, supplementary items
  5. Remuneration of employees less related travel and transport expenses and taxes and social contributions — Earned income account (for remuneration of employees), standard component; Services account (for travel and transport expenses) and transfer income account (for taxes and social contributions), supplementary items
  6. Capital transfers between households — Capital account, supplementary item
  7. Social benefits — Transfer income account, supplementary item
  8. Current transfers to NPISHs — Transfer income account, supplementary item
  9. Capital transfers to NPISHs — Capital account, supplementary item

- Important relationships (exact formulas):
  - “Net” remuneration of employees (#5)= #1 minus the sum of #3 and #4
  - Personal remittances = #2 plus #5 plus #6
  - Total remittances= #2 plus #5 plus #6 plus #7
  - Total remittances and transfers to NPISHs = #2 plus #5 plus #6 plus #7 plus #8 plus #9

### C. Standard BOP components related to remittances
- Two BOP current account items that substantially relate to remittances:
  1. Remuneration of employees
     - Refers to income of border, seasonal, and other short-term workers employed in an economy where they are not resident and of residents employed by nonresident entities/employers (including remote workers).
     - Represents “remuneration in return for the labor input to the production process contributed by an individual in an employer-employee relationship with the enterprise.”
     - Recorded gross before taxes and other expenses incurred in the economy where the work is performed (or in the economy of employer in the case of remote workers).
     - For personal remittances derivation, a net measure of remuneration of employees is used (see paragraph A4.8).
  2. Personal transfers
     - Consist of all current transfers, in cash or in kind, made or received by resident households to or from nonresident households (paragraph 12.21).
     - Personal transfers are a subset of current transfers and cover all current transfers that are sent by households to households.
     - Defined independently of the source of income of the sending household, the relationship between households, and the purpose for which the transfer is made.
     - The term “personal transfers” replaced “workers’ remittances” in BPM6.

### D. Related transactions (non-remittance cross-border flows)
- Investment by migrants:
  - Migrants frequently invest in their economy of origin (bank deposits, portfolio investments, real estate, small enterprises); these are cross-border investments included in the financial account and are not remittances in the BOP framework.
  - In some cases investments can be vehicles for remittances (e.g., deposits accessible to relatives, joint accounts, real estate occupied by relatives without market rent, enterprises paying above-market incomes to relatives); when such patterns are known, imputed transfers or estimates can be made on the basis of aggregate transaction data and benchmarks.
- Travel:
  - Travel refers to acquisition of goods and services in an economy by visiting non-residents; acquisitions by border, seasonal, and other short-term workers in their economy of employment are included in travel (paragraph 10.89).
  - Travel excludes acquisition of valuables, consumer durables, and other consumer purchases included in general merchandise (paragraph 10.90).
  - Compilation of supplementary remittance definitions requires that travel expenses of border, seasonal, and other short-term workers be subtracted from remuneration of employees; separating travel related to employment from other travel may be difficult in practice.

### E. Concepts of residence, valuation, and time of recording
- Residence:
  - BOP and national accounts frameworks identify residents and nonresidents relative to each reporting economy; personal transfers and remittances are based on residence rather than migration status.
  - Residence of households is determined by center of predominant economic interest; guideline: being present for one year or more in a territory or intending to do so qualifies as resident (paragraph 4.117).
  - Short trips do not change residence; going abroad with intention to stay one year or longer does.
  - If a member of an existing household ceases to reside in the territory where the household is resident, the individual ceases to be a member of that household (paragraph 4.118).
  - Migrants going abroad to work become residents of the host economy (assuming plan to stay one year or longer) but can rejoin original household on return.
  - Specific guidelines exist for students, medical patients, ship crews, diplomats, military personnel, and civil servants employed abroad in government enclaves; regardless of length of stay, these groups are considered residents of the originating economy (paragraphs 4.120–4.123).
- Implications for remittance recording:
  - Transactions are recorded differently depending on the residence status of individuals in their host economy.
  - Border, seasonal, and other short-term workers are nonresident where they work and their gross income is recorded as “remuneration of employees.”
  - No BOP entries exist for wages of migrant workers who stay at least a year and thus are residents of the same economy as their employer; when such migrants send remittances to a household in another economy, these are recorded as “personal transfers.”
  - Nonresident employers (embassies, international organizations, nonresident companies, employers of cross-border remote workers) can have substantial impact on remittance data; when resident workers work for nonresident employers, their wages and other benefits are recorded as “remuneration of employees.”

*Source: IMF — Annex 4 Remittances, Section 1.*

### Section 2

### BPM7 Annex 4 — Remittances (Section 2)

### Residency, transfers, and reclassification
- A4.26: The distinction between a transaction and a reclassification of residence is important for the structure of the system, though the effect on the asset position of households and economies is much the same whether resources arrive through remittances or through migrants returning home.
- Migrants returning to reside in their economy of origin who bring goods or own assets: the assets that migrants bring with them on return are excluded from balance of payments transactions and are not recorded as transfers.
- When the residence of the owner changes but ownership does not, the change in assets (such as bank balances and real estate ownership) between economies is recorded as a reclassification in the IIP change, not a transaction.
- A4.27: No special residency treatment is adopted for refugees; their residence changes from their home territory to the territory of refuge if they have stayed or intend to stay in their place of refuge for one year or more.
- If refugees are considered residents in the country of refuge, then income funds they receive from nonresident entities are included in remittances, as are any income funds they send to nonresident households.
- Note for data users: Users interested in understanding all contributions migrant workers make to origin households and economies should note potential misalignment between their data needs and balance of payments definitions and should make appropriate additional estimations.

### Remote workers and residency
- Remote workers are not resident in the economy of their employer (statement present in the source).

### Valuation principles
- A4.28: All valuations in the balance of payments framework are based on market values (see paragraph 3.68).
- A4.29: Remuneration of employees comprises:
  - wages and salaries in cash,
  - wages and salaries in kind,
  - employers’ social contributions,
  - all forms of bonuses and allowances (see paragraphs 11.18–11.19).
- All transactions in kind should be valued at current market prices, that is, the current exchange value.
- A4.30: Transfers in kind should be valued at the market value of the goods or services provided to the recipient (see paragraphs 3.71–3.72).
- The valuation of cash transfers is clear, while transfers of other financial assets should be recorded at market value.

### Timing and recording
- A4.31: Remuneration of employees is recorded on an accrual basis (see paragraph 11.16).
- Transfers are recorded on an accrual basis (discussed in paragraph 3.50).
- In the case of voluntary transfers, accrual and settlement are often identical (see paragraph 3.52 for details on time of recording of transfers).
- Involuntary transfers (such as taxes or alimony) should, in principle, be recorded when accrued, though this can be difficult in practice.
- Remittances are mostly voluntary transfers.

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/bpm7-annex-4-v7-remittances.pdf_