## Chapter 13 Transfer Income Account Secondary Transfer Income Account

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### Overview of the Secondary Transfer Income Account
- Purpose:
  - The secondary transfer income account records current transfers between residents and non-residents (paragraph 13.1).
  - Transfers may be made in cash or in kind; capital transfers are shown in the capital account (paragraph 13.1).
- Relationship to national accounts:
  - Secondary transfer income, together with primary earned income, affects gross national disposable income (paragraph 13.2).
  - Capital transfers do not affect disposable income and are recorded in the capital account (paragraph 13.2).
- Balances and linkages:
  - The balance on the secondary transfer income account equals total credits/revenues less total debits/expenditures; it is called balance on secondary income (paragraph 13.3).
  - The balance of the sum of all current account transactions (the current account balance) is presented at the end of the current accounts sequence (paragraph 13.3).
  - The current account balance is equal to the gross saving-investment less gross capital formation balance (or net savings plus depletion less net capital formation) for the economy (paragraph 13.3).

### Components and presentation
- Key line items (Table 13.1, paragraph 13.4) include:
  - Personal transfers
  - Current taxes on income, wealth, etc.
  - Social contributions
  - Social benefits
  - Net nonlife insurance premiums less service charges
  - Nonlife insurance claims
  - Current international cooperation
  - Miscellaneous current transfers
  - Total current transfers credits/revenues and debits/expenditures
  - Balance on transfer income
  - Adjustment for change in pension entitlements
  - Current account balance
  - Current account balance (excluding reinvested earnings)
- Note: Table 13.1 is expository; Standard Components are referenced in Annex 14 (paragraph 13.4).

### Concepts and coverage
- Transactions: exchanges vs transfers (paragraphs 13.6–13.7):
  - An exchange is provision in return for a corresponding item; a transfer has no corresponding return (paragraphs 13.6–13.7).
  - Transfer types:
    - Cash transfer: payment of currency or transferable deposit without anything supplied in return (paragraph 13.7).
    - Transfer in kind: transfer of ownership of a good or asset (other than cash) or provision of a service without corresponding return (paragraph 13.7).
  - Some transfers may entitle payer to contingent future benefits; taxes on products and production are treated as primary earned income (paragraph 13.8).
- Borderline cases and institutional guidance (paragraph 13.9–13.11):
  - Distinction between taxes and charges for government services; distinction between personal transfers and compensation depends on residency of worker; distinction between financial transactions and personal transfers referenced (paragraph 13.9).
  - NPISHs: flows between NPISHs are generally transfers rather than investment (paragraph 13.10).
  - Transfers generally do not arise between commercial entities; flows within direct investment relationships that are provision of goods or services without explicit charge are treated as direct investment equity, not transfers. Exceptions include net nonlife insurance premiums less service charges and nonlife insurance claims (paragraph 13.11).
- Current vs capital transfers (paragraphs 13.13–13.15):
  - Capital transfers involve change of ownership of an asset (other than cash or inventories), oblige acquisition/disposal of such assets, or forgiveness of a liability; cash transfers linked to acquisition/disposal of fixed assets are capital transfers (paragraph 13.13).
  - Current transfers are unrequited transactions that do not oblige acquisition or disposal of noncash/non-inventory assets and affect disposable income (paragraph 13.14).
  - Classification rules:
    - If one party treats a transfer as capital and the other as current, classify it as capital for both (paragraph 13.15).
    - When in doubt, treat the transfer as current (paragraph 13.15).

### Recording and valuation of transfers
- Recording principles (paragraph 13.16):
  - Each transfer gives rise to two entries, one for each party (paragraph 13.16).
  - Cash transfers:
    - Donor: decrease in currency and deposits; transfer payable (debit/expenditure in transfer income account).
    - Recipient: increase in currency and deposits; transfer receivable (credit/revenue in transfer income account).
  - In-kind transfers:
    - Donor: records export of goods or services and transfer payable.
    - Recipient: records import of goods or services and transfer receivable.
  - Forgiveness of liability: creditor extinguishes financial asset and debtor extinguishes liability; corresponding entries recorded as transfers.
- Timing (paragraphs 13.17–13.18):
  - Time of recording generally determined by time of change of economic ownership of corresponding resources (paragraph 13.17).
  - Grants and voluntary transfers: recorded when all eligibility conditions are satisfied; accrued but unpaid voluntary and compulsory transfers use other accounts receivable/payable (paragraph 13.17).
  - If recipient never has a claim, record when cash is paid, asset conveyed, or liability forgiven (paragraph 13.17).
  - Taxes and compulsory transfers: recorded when activities, transactions, or events create government’s claim to the taxes—the time the tax liability arises as evidenced by assessments, declarations, sales invoices, customs declarations (paragraph 13.18).
  - If tax data are on cash basis, adjust for large differences to approximate accrual (paragraph 13.18).
  - Fines, penalties, and property forfeitures: recorded on accrual basis when the receiving unit has an unconditional legal claim; if subject to appeal, record when appeal is resolved (paragraph 13.18).
- Valuation (paragraph 13.19):
  - The value of a transfer equals the value of the corresponding resource flow (paragraph 13.19).
  - In-kind transfers raise valuation difficulties; valuation principles for in-kind transactions are described in paragraph 3.72 (paragraph 13.19).

### Types of Current Transfers (paragraph 13.20)
- Classified current transfers:
  - Personal transfers
  - Other current transfers comprising:
    - (a) current taxes on income, wealth, etc.
    - (b) social contributions
    - (c) social benefits
    - (d) net nonlife insurance premiums less service charges
    - (e) nonlife insurance claims
    - (f) current international cooperation
    - (g) miscellaneous current transfers
- Recording illustration:
  - Box 13.1 provides examples of recording current transfers in cash and in kind (paragraph 13.20).
  - If illustrated transfers were capital transfers, they would instead be recorded in the capital account (paragraph 13.20).

### Examples of recording transfers (Box 13.1)
- Example 1 — current transfer in cash:
  - Scenario: A government social security fund in Economy A pays 10 in cash to a resident in Economy B.
  - Recording in Economy A:
    - Transfer income account, General Government, Social benefits 10 debit/expenditure
    - Financial account -10 net acquisition of financial assets
  - Recording in Economy B:
    - Transfer income account, non-government sectors, Social benefits 10 credit/revenue
    - Financial account 10 net acquisition of financial assets
- Example 2 — current transfer in kind:
  - Scenario: An enterprise in Economy A donates output valued at 75 to an NGO resident in Economy B.
  - Recording in Economy A:
    - Transfer income account, non-government sectors, Miscellaneous current transfers 75 debit/expenditure
    - Goods account 75 exports (credit/revenue)
  - Recording in Economy B:
    - Transfer income account, non-government sectors, Miscellaneous current transfers 75 credit/revenue
    - Goods account 75 imports (debit/expenditure)

### Personal transfers (paragraph 13.21)
- Definition and coverage:
  - Personal transfers are all current transfers in cash or in kind made or received by resident households to or from nonresident households (paragraph 13.21).
  - Include all current transfers between resident and nonresident individuals regardless of:
    - (a) source of income of the sender (labor, entrepreneurial or property income, social benefits, other transfers, or disposal of assets) (paragraph 13.21).
    - (b) relationship between households (related or unrelated individuals) (paragraph 13.21).
  - By convention, current transfers between households relating to lotteries and other gambling are included under personal transfers (paragraph 13.21).

### Residence status and personal transfers (paragraphs 13.23–13.24)
- Personal transfers are determined by the residence status of the person concerned (13.23).
- Workers:
  - Personal transfers include only those transfers abroad made by workers who are residents of the economy in which they are employed (13.23).
- Transactions and conventions:
  - Resources sent abroad by residents to finance other residents staying abroad are not recorded as current transfers in the balance of payments because both parties are residents; such expenses abroad constitute purchases of education services (13.23).
  - Expenditures incurred abroad by residents staying for less than one year in foreign economic territories are generally recorded as travel (see paragraphs [10.86–10.100]) (13.23).
  - Funds sent abroad by individuals resident in the economy in which they are employed to make a deposit in their own account with a bank abroad represent a financial investment recorded in the financial account, not as a personal transfer (13.24).
  - Withdrawals from such foreign deposits to provide resources to a relative or another person (without a quid pro quo) should be recorded as a personal transfer (13.24).
  - Joint accounts involving emigrant workers and relatives: conventions exist for classifying the account and flows as resident or nonresident transactions depending on usability and location (13.24).

### Remittances: definitions and supplementary categories (Box 13.2; paragraphs 13.27 and 13.22)
- Three supplementary remittance categories (Appendix 5/Annex 4; 13.27):
  - (a) Personal remittances (recipient economy perspective):
    - Personal transfers receivable;
    - + Remuneration of employees receivable (see paragraph [12.10]);
    - – Taxes and social contributions payable (related to remuneration of employees, see paragraphs [13.28 and 13.32]);
    - – Transport and travel expenditures payable by residents employed by nonresidents (as defined under business travel in paragraphs [10.91–10.93 in BPM7 Chapter 11]);
    - + Capital transfers receivable from households. (13.27)
  - (b) Total remittances (recipient economy perspective):
    - Personal remittances receivable;
    - + Social benefits receivable.
    - Note: Conceptually would include nonlife insurance transactions, but these are excluded on practical grounds. (13.27)
  - (c) Total remittances and transfers to NPISHs (recipient economy perspective):
    - Total remittances receivable;
    - + Current transfers receivable by NPISHs;
    - + Capital transfers receivable by NPISHs. (13.27)
- Workers’ remittances are a supplementary sub-item of personal transfers that include only current transfers by migrants who are employed in new economies and considered residents there (see paragraph A4.17) (13.22).

### Lotteries and gambling (paragraphs 13.25–13.26)
- Payments for lottery tickets or bets consist of:
  - (a) a service charge to the unit organizing the lottery or gambling (paragraph [10.171]);
  - (b) current transfers payable from gamblers to winners and, in some cases, to charities. Transfers regarded as taking place directly from participants to winners and charities, not recorded as transfers to or by the unit operating the lottery or gambling (13.25).
- Some service charges at purchasers’ prices may include gambling taxes, shown as payable by the operator, not the customers (13.25).
- When nonresident households gamble, net transfers between residents and nonresidents may arise. If a lottery winner receives a stream of payments, the receipt should be recorded as a current transfer equal to the present value of the payment stream together with the immediate purchase of an annuity; recording of annuities is described in paragraphs [A6c.29–A6c.35] (13.26).

### Current taxes on income, wealth, etc. (paragraphs 13.28–13.31)
- Scope and recording:
  - Consist mainly of taxes levied on income earned by nonresidents from labor or financial assets; taxes on capital gains arising from assets of nonresidents are also included (13.28).
  - Taxes on wages and salaries earned by nonresident employees are recorded as payable by the nonresident employees (13.28).
  - Taxes on interest and dividends are recorded as payable by the recipients; taxes on financial transactions payable by nonresidents are current transfers (13.28).
  - If such taxes have been classified as other taxes on products and production in the national accounts, by convention they may be recorded in the earned income account in the international accounts for consistency (13.28).
  - Taxes on rent and ownership of land are generally not recorded in the balance of payments (13.28).
  - Inheritance taxes are treated as capital transfers (13.28).
  - Refunds of taxes to taxpayers are treated as negative taxes, reducing the amount of taxes (13.28).
- Specific permission fees (licenses, permits, certificates):
  - If compulsory and nontransferable, generally considered taxes; if payment is requited and a service commensurate with the payment is consumed, recorded as a sale of a service. If license issuance involves regulatory functions, payments should be treated as purchases of services from government unless payments are not broadly proportional to costs (paragraph 13.30).
- Fines or penalties on late payment of taxes are included in the amount of associated taxes (paragraph 13.31).

### Social contributions and pension-related adjustments (paragraphs 13.32–13.39, 13.35–13.36)
- Social contributions:
  - Actual or imputed contributions made by households payable to social insurance schemes to provide for social benefits (13.32).
  - Schemes include social security schemes and employment-related schemes (funded and unfunded pension schemes); employer-independent schemes that establish separate institutional units may also qualify (13.32).
- Recording in balance of payments:
  - Social contributions recorded when a resident makes contributions to social security and other pension schemes in another economy for employment in that economy, or when a nonresident employer makes actual or imputed contributions on behalf of the employee. Employer social contributions are included in remuneration of employees (13.32a).
  - For social security schemes, total social contributions payable by employees are recorded as a transfer payable by employees because employer-payable amounts are included in compensation (13.33).
- Calculation of total social contributions less service charges (paragraph 13.35):
  - Employers’ actual contributions;
  - + Employers’ imputed contributions;
  - + Policyholders’ actual contributions;
  - + Contribution supplements corresponding to investment income payable by pension schemes on pension entitlements;
  - – Service charges payable to pension schemes.
- Employers’ actual and imputed contributions are rerouted through employees (paragraph 13.36).
- Pension entitlements and adjustment item (paragraphs 13.37–13.39):
  - Pension entitlements are claims of beneficiaries on funds; payments of social contributions into pension schemes and receipt of pensions constitute acquisition and disposal of financial assets and are recorded as current transfers so that household disposable incomes reflect these flows (13.37).
  - Adjustment for change in pension entitlements equals:
    - total social contributions less service charges (the total value of actual social contributions payable into pension schemes);
    - + total value of contribution supplements payable out of property income attributed to pension fund beneficiaries;
    - – value of associated service charges;
    - – total value of pensions paid out as social benefits by pension schemes.
    - (Changes arising from capital transfers are not included.) (13.38)
  - When cross-border flows of pension contributions and pension benefits are significant, the adjustment item must be recorded to reconcile current and financial accounts: added to the balance on secondary transfer income for the economy of the employees/policyholders (credit) and deducted for the economy of the pension schemes (debit). When cross-border flows are minor, the adjustment item may be omitted (13.39).

### Social benefits (paragraph 13.40)
- Social benefits are current transfers receivable by households intended to provide for needs arising from events or circumstances (sickness, unemployment, retirement, housing, education, family circumstances) and include pension and nonpension benefits payable under social security and other social insurance schemes (13.40).
- Social benefits include cash or in-kind benefits payable by government units or NPISHs to meet the same needs as social insurance schemes but not made under a social insurance scheme (social assistance) (13.40).
- Cross-border social benefits may be significant where a significant number of residents have or had employment in other economies (13.40).

### Nonlife insurance premiums less service charges (paragraph 13.41)
- Net nonlife insurance premiums and net premiums on standardized guarantees are described in paragraphs 12.42 and 12.43 (13.41).
- Net nonlife insurance premiums less service charges are derived from total nonlife insurance premiums and premium supplements after deducting the service charges; only the net nonlife insurance premiums constitute current transfers (13.41).

### Nonlife insurance premiums and premium supplements (paragraphs 13.42–13.42a)
- Nonlife insurance premiums: "the actual amounts payable to the direct insurer or reinsurer to secure insurance cover for a specific event over a stated Ɵme period" (paragraph 13.42).
- Nonlife insurance premium supplements: "the investment income earned from the investment of the (nonlife) insurance technical reserves" (paragraph 13.42).
- The total of nonlife insurance premiums and premium supplements must cover:
  - payments of service charges to insurance enterprises for arranging the insurance, and
  - payments for the insurance itself (paragraph 13.42).
- After deducting service charges (calculation explained in paragraph [10.111]), the remainder is "net nonlife insurance premiums less service charges" — amounts available to provide cover against events causing damage or loss (paragraph 13.42).
- Hybrid insurance products (paragraph 13.42a):
  - If a hybrid product is allocated to nonlife insurance, then the full amount of premiums less service charges is recorded in the transfer income account.
  - If a hybrid product is allocated to life insurance, no part of premiums less service charges is recorded in the transfer income account; instead, premiums less service charges are recorded in the financial account.

### Standardized guarantees (paragraph 13.43)
- Standardized guarantees: issued in large numbers, for small amounts, with identical conditions, and where the probability of default can be well established (paragraph 13.43).
- Standardized guarantees have the same characteristics as nonlife insurance when many guarantees of the same sort are issued and a realistic estimate of overall claims is possible (paragraph 13.43).
- Fees payable and investment income on technical provisions for calls are treated like nonlife insurance premiums and premium supplements; calls under the guarantees are treated like nonlife insurance claims (paragraph 13.43).
- Net premiums less service charges on standardized guarantees are derived from total premiums and premium supplements after deducting service charges (paragraph 13.43).

### Nonlife insurance claims and calls under standardized guarantees (paragraphs 13.44–13.46, 13.45a)
- Nonlife insurance claims:
  - Amounts payable in settlement of injuries or damages that result from an event covered by a nonlife insurance (or reinsurance) policy (paragraph 13.44).
  - Claims become due when the eventuality occurs that gives rise to a valid claim; equal to claims paid within the accounting period plus changes in technical reserves against outstanding claims (paragraph 13.44).
  - Nonlife reinsurance claims are calculated and recorded in the same way as direct nonlife insurance (paragraph 13.44).
- Timing and classification:
  - Nonlife insurance claims are treated as transfers to the claimant that accrue at the time the insured event occurs (paragraph 13.45).
  - Insurance claims have mixed current and capital elements. As a convention, cross-border nonlife insurance claims are generally treated as current transfers, except for major catastrophic events where some proportion may be recorded as capital transfers (see paragraph [13.24 in BPM7 Ch 14]) (paragraph 13.45).
- Hybrid products:
  - Treatment of claims and benefits on hybrid insurance products depends on allocation to life or nonlife, consistent with the treatment of net premiums on hybrid products (paragraph 13.45a).
- Claims and calls payable under standardized guarantees and government schemes where payments into the scheme are treated as nonlife insurance premiums are recorded under this item in the secondary transfer income account (paragraph 13.46).

### Current international cooperation (paragraphs 13.47–13.51)
- Definition and included items (paragraph 13.47):
  - Current transfers in cash or in kind between governments of different countries or between governments and international organisations.
  - (a) Transfers between governments used by recipients to finance current expenditures, including emergency aid after natural disasters; includes transfers in kind such as food, clothing, blankets, medicines.
  - (b) Annual or other regular contributions paid by member governments to international organisations (excluding taxes payable to supranational organisations) and regular transfers by international organisations to governments.
  - (c) Payments by governments or international organisations to cover salaries of technical assistance staff deemed resident in the host economy and in an employer-employee relationship with the host government; includes technical assistance supplied in kind.
- Exclusions and valuation:
  - Transfers intended for capital formation are recorded as capital transfers; contributions that give rise to equity are acquisitions of shares or other equity (paragraph 13.47).
  - External aid via nonresident entities created to undertake fiscal functions is considered current international cooperation (paragraphs 13.48 and 8.24–8.26).
  - Valuation of in-kind assistance:
    - Goods and services acquired from market producers and provided without charge should be valued at market prices (prices paid by purchasers) (paragraph 13.49).
    - Transfers in kind produced by international organisations, governments, or NPISHs should be valued on a cost-of-production basis (paragraph 13.49).
- Technical assistance and concessional loans:
  - Technical assistance generally has characteristics of current transfers; technical assistance tied to or part of capital projects is classified as capital transfers (paragraph 13.50).
  - Concessional loans: loans with concessional interest rates could be seen as providing a current transfer equal to the difference between actual interest and market-equivalent interest (paragraph 13.51).
  - Appropriate treatment in SNA and international accounts is unresolved; until agreed, information on concessional debt may be provided as supplementary information showing benefits as one-off transfers at loan origination equal to the difference between nominal debt and its present value using a relevant market discount rate (paragraph 13.51).
  - The supplementary-information approach is recommended for official lending intended to convey a benefit and occurring in a noncommercial setting (usually government-to-government); commercial situations are treated differently (paragraph 13.51).

### Miscellaneous current transfers (paragraphs 13.52–13.58)
- Definition:
  - Miscellaneous current transfers include all current transfers, in cash or in kind, other than personal transfers; current taxes on income, wealth, etc.; social contributions; social benefits; net nonlife insurance premiums and claims; and current international cooperation (paragraph 13.52).
- Current transfers to NPISHs (paragraph 13.53):
  - Transfers received by resident NPISHs from nonresident institutional units as membership dues, subscriptions, donations, whether regular or occasional.
  - Grants and donations between NPISHs generally classified as current transfers (e.g., donations for relief works).
- Fines and penalties (paragraphs 13.54–13.54a):
  - Fines and penalties imposed by courts of law or quasi-judicial bodies are treated as miscellaneous current transfers, except when intended to compensate for injury or damage, in which case they should be considered compensation payments and recorded as current or capital transfers as appropriate (paragraph 13.54).
  - Early or late repayment penalties agreed as part of original contract are not included in current transfers; they should be treated with the associated good, service, or income.
  - Contractual contingent fines or penalties in mergers and acquisitions that effectively adjust the market price of an acquired enterprise are treated as direct investment transactions (or portfolio investment if the buyer has less than 10 percent voting power), not as current transfers (paragraph 13.54a).
- Compensation payments (paragraphs 13.55–13.56):
  - Compensation payments are current transfers paid in compensation for injury to persons or damage to property not settled as nonlife insurance claims; may be compulsory (court-awarded) or out-of-court settlements (paragraph 13.55).
  - Major compensation payments for extensive damages (e.g., oil spillages or side effects of pharmaceutical products or anti-competitive behavior) are treated as capital rather than current transfers (paragraph 13.56).
- Nonrefundable contributions under citizenship-by-investment programs (paragraph 13.56a):
  - Nonrefundable contributions by nonresident individuals to governments, nominated development funds, or NPISHs are recorded as transfers.
  - If not intended for capital investment projects, they are treated as current transfers.
  - Such contributions are not identified separately in the balance of payments, but countries where these programs are important can publish a supplementary item within other miscellaneous current transfers (paragraph 13.56a).
- Other (paragraphs 13.57–13.58):
  - Gifts and donations of a current nature not included elsewhere are regarded as current transfers (paragraph 13.57).
  - Membership dues or subscriptions to market nonprofit organisations serving businesses (e.g., chambers of commerce or trade associations) are treated as payments for services rendered and are not transfers (paragraph 13.57).
  - Payments to international or supranational authorities that are compulsory, for which nothing is provided in return, but which are not taxes, are classified as miscellaneous transfers (paragraph 13.58).

*International Monetary Fund — BPM7 Chapter 13, Transfer Income Account*

### Chapter 12Chapter 13 Transfer Income Account Secondary Transfer Income Account

### Secondary Transfer Income Account

### Overview of the Secondary Transfer Income Account
- Purpose:
  - The secondary transfer income account records current transfers between residents and non-residents (paragraph 13.1).
  - Transfers may be made in cash or in kind; capital transfers are shown in the capital account (paragraph 13.1).
- Relationship to national accounts:
  - Secondary transfer income, together with primary earned income, affects gross national disposable income (paragraph 13.2).
  - Capital transfers do not affect disposable income and are recorded in the capital account (paragraph 13.2).
- Balances and linkages:
  - The balance on the secondary transfer income account equals total credits/revenues less total debits/expenditures; it is called balance on secondary income (paragraph 13.3).
  - The balance of the sum of all current account transactions (the current account balance) is presented at the end of the current accounts sequence (paragraph 13.3).
  - The current account balance is equal to the gross saving-investment less gross capital formation balance (or net savings plus depletion less net capital formation) for the economy (paragraph 13.3).

### Components and presentation
- The components and structure are shown in Table 13.1 (paragraph 13.4). Key line items listed in the table include:
  - Personal transfers
  - Current taxes on income, wealth, etc.
  - Social contributions
  - Social benefits
  - Net nonlife insurance premiums less service charges
  - Nonlife insurance claims
  - Current international cooperation
  - Miscellaneous current transfers
  - Total current transfers credits/revenues and debits/expenditures
  - Balance on transfer income
  - Adjustment for change in pension entitlements
  - Current account balance
  - Current account balance (excluding reinvested earnings)
- Note: Table 13.1 is expository; Standard Components are referenced in Annex 14 (paragraph 13.4).

### Concepts and coverage
- Two key distinctions in the chapter:
  - Transfers vs. other transaction types (paragraph 13.5).
  - Current transfers vs. capital transfers (paragraph 13.5).
- Transactions: exchanges and transfers
  - Every transaction is either an exchange (provision in return for a corresponding item) or a transfer (no corresponding return) (paragraphs 13.6–13.7).
  - A transfer is an entry corresponding to the provision of a good, service, financial asset, or other nonproduced asset when there is no corresponding return of an item of economic value (paragraph 13.7).
  - Cash transfer: payment of currency or transferable deposit without anything supplied in return (paragraph 13.7).
  - Transfer in kind: transfer of ownership of a good or asset (other than cash) or provision of a service without corresponding return (paragraph 13.7).
  - Some transfers (e.g., net nonlife insurance premiums less service charges, taxes other than on products and production) may entitle the payer to contingent future benefits; taxes on products and production are treated as primary earned income (paragraph 13.8).
  - Borderline cases and guidance:
    - Distinction between taxes and charges for government services—see referenced guidelines (paragraph 13.9).
    - Distinction between personal transfers and compensation/remuneration of employees depends on residency of the worker (paragraph 13.9).
    - Distinction between financial transactions and personal transfers discussed in paragraph 12.13.24 (paragraph 13.9).
  - NPISHs: flows between NPISHs are generally transfers rather than investment (paragraph 13.10).
  - Transfers generally do not arise between commercial entities; flows within direct investment relationships that are provision of goods or services without explicit charge are treated as direct investment equity, not transfers (paragraph 13.11). Exceptions include net nonlife insurance premiums less service charges and nonlife insurance claims (paragraph 13.11).
- Distinction between current and capital transfers
  - Capital transfers:
    - Involve change of ownership of an asset (other than cash or inventories), oblige acquisition/disposal of such assets, or forgiveness of a liability (paragraph 13.13).
    - Cash transfers linked to acquisition or disposal of fixed assets (e.g., investment grants) are capital transfers (paragraph 13.13).
    - Capital transfers result in commensurate changes in stocks of assets/liabilities without affecting saving of either party (paragraph 13.13).
    - Transfer of capital equipment by a direct investor to a direct investment enterprise without charge is not a capital transfer but direct investment equity (paragraph 13.13).
    - Major nonrecurrent payments compensating accumulated losses or extensive damages not covered by insurance are capital transfers (paragraph 13.13).
  - Current transfers:
    - Unrequited transactions that do not oblige acquisition or disposal of noncash/non-inventory assets (paragraph 13.14).
    - Affect disposable income and consumption possibilities; examples: social benefits and food aid (paragraph 13.14).
  - Classification rule:
    - If one party would treat a transfer as capital and the other as current, classify it as capital for both parties (paragraph 13.15).
    - When in doubt, treat the transfer as current (paragraph 13.15).

### Recording and valuation of transfers
- Recording principles:
  - Each transfer gives rise to two entries, one for each party (paragraph 13.16).
  - For cash transfers:
    - Donor: decrease in currency and deposits; transfer payable (debit/expenditure in transfer income account) (paragraph 13.16).
    - Recipient: increase in currency and deposits; transfer receivable (credit/revenue in transfer income account) (paragraph 13.16).
  - For in-kind transfers:
    - Donor: records export of goods or services and transfer payable (paragraph 13.16).
    - Recipient: records import of goods or services and transfer receivable (paragraph 13.16).
  - Forgiveness of liability: creditor extinguishes financial asset and debtor extinguishes liability; corresponding entries recorded as transfers (paragraph 13.16).
- Timing (recording) rules:
  - Time of recording generally determined by time of change of economic ownership of corresponding resources (paragraph 13.17).
  - Grants and voluntary transfers: recorded when all eligibility conditions are satisfied; accrued but unpaid voluntary and compulsory transfers use other accounts receivable/payable (paragraph 13.17).
  - If recipient never has a claim, record when cash is paid, asset conveyed, or liability forgiven (paragraph 13.17).
  - Taxes and compulsory transfers:
    - Recorded when activities, transactions, or events create government’s claim to the taxes—the time the tax liability arises as evidenced by assessments, declarations, sales invoices, customs declarations (paragraph 13.18).
    - If tax data are on cash basis, adjust for large differences to approximate accrual (paragraph 13.18).
    - Transfers such as fines, penalties, and property forfeitures are recorded on an accrual basis when the receiving unit has an unconditional legal claim (e.g., court judgment or administrative ruling); if subject to appeal, record when appeal is resolved (paragraph 13.18).
- Valuation:
  - The value of a transfer equals the value of the corresponding resource flow (paragraph 13.19).
  - In-kind transfers raise valuation difficulties; valuation principles for in-kind transactions are described in paragraph 3.72 (paragraph 13.19).

### Types of Current Transfers
- Classified current transfers (paragraph 13.20):
  - Personal transfers
  - Other current transfers comprising:
    - (a) current taxes on income, wealth, etc.
    - (b) social contributions
    - (c) social benefits
    - (d) net nonlife insurance premiums less service charges
    - (e) nonlife insurance claims
    - (f) current international cooperation
    - (g) miscellaneous current transfers
- Recording illustration:
  - Box 13.1 provides examples of recording current transfers in cash and in kind (paragraph 13.20).
  - If illustrated transfers were capital transfers, they would instead be recorded in the capital account (paragraph 13.20).

### Examples of recording transfers (Box 13.1)
- Example 1 — current transfer in cash (paragraphs under Box 13.1):
  - Scenario: A government social security fund in Economy A pays 10 in cash to a resident in Economy B.
  - Recording in Economy A:
    - Transfer income account, General Government, Social benefits 10 debit/expenditure
    - Financial account -10 net acquisition of financial assets
  - Recording in Economy B:
    - Transfer income account, non-government sectors, Social benefits 10 credit/revenue
    - Financial account 10 net acquisition of financial assets
- Example 2 — current transfer in kind (paragraphs under Box 13.1):
  - Scenario: An enterprise in Economy A donates output valued at 75 to an NGO resident in Economy B.
  - Recording in Economy A:
    - Transfer income account, non-government sectors, Miscellaneous current transfers 75 debit/expenditure
    - Goods account 75 exports (credit/revenue)
  - Recording in Economy B:
    - Transfer income account, non-government sectors, Miscellaneous current transfers 75 credit/revenue
    - Goods account 75 imports (debit/expenditure)

### Personal transfers
- Definition and coverage:
  - Personal transfers are all current transfers in cash or in kind made or received by resident households to or from nonresident households (paragraph 13.21).
  - Include all current transfers between resident and nonresident individuals regardless of:
    - (a) source of income of the sender (labor, entrepreneurial or property income, social benefits, other transfers, or disposal of assets) (paragraph 13.21).
    - (b) relationship between households (related or unrelated individuals) (paragraph 13.21).
  - By convention, current transfers between households relating to lotteries and other gambling are included under personal transfers (paragraph 13.21).

*International Monetary Fund*

### 13.23  The connection to the residence status of the person concerned is important in determining

### bpm7-chapter-13-v7-transfer-income-account - 13.23 The connection to the residence status of the person concerned is important in determining whether a personal transfer is involved

### Residence status and personal transfers (paragraphs 13.23–13.24)
- Personal transfers are determined by the residence status of the person concerned (13.23).
- Workers: personal transfers include only those transfers abroad made by workers who are residents of the economy in which they are employed (13.23).
- Resources sent abroad by residents to finance other residents who are staying abroad (e.g., parents financing children studying in other territories) are not recorded as current transfers in the balance of payments because both parties are residents of the same economy; such expenses abroad constitute purchases of education services (13.23).
- Expenditures incurred abroad by residents staying for less than one year in foreign economic territories are generally recorded as travel (see paragraphs [10.86–10.100]) (13.23).
- Funds sent abroad by individuals resident in the economy in which they are employed, self-employed, or operating a business, for the purpose of making a deposit in their own account with a bank located abroad, represent a financial investment recorded in the financial account, not as a personal transfer (13.24).
- Withdrawals from such foreign deposits to provide resources to a relative or another person (without a quid pro quo) should be recorded as a personal transfer (13.24).
- Joint accounts involving emigrant workers and relatives: if the joint account in the home country is freely usable by its holders in the home country, the account may be considered held by residents in the home economy (liability to residents); deposits by the nonresident shown as funded by a transfer from abroad, withdrawals by the nonresident shown as a transfer abroad, and resident transactions treated as domestic (13.24).
- Conversely, for deposits of emigrant workers in an account held in the host economy that are freely usable by relatives in the home economy, a convention can be adopted that withdrawals by relatives in the home economy be treated as personal transfers (13.24).

### Remittances: definitions and supplementary categories (Box 13.2; paragraphs 13.27 and 13.22)
- Appendix 5/Annex 4 defines three categories of remittances that may be included as supplementary items (13.27):
  - (a) Personal remittances (from the perspective of the recipient economy):  
    - Personal transfers receivable;  
    - + Remuneration of employees receivable (see paragraph [12.10]);  
    - – Taxes and social contributions payable (related to remuneration of employees, see paragraphs [13.28 and 13.32]);  
    - – Transport and travel expenditures payable by residents employed by nonresidents (as defined under business travel in paragraphs [10.91–10.93 in BPM7 Chapter 11]);  
    - + Capital transfers receivable from households. (13.27)
  - (b) Total remittances (from the perspective of the recipient economy):  
    - Personal remittances receivable;  
    - + Social benefits receivable. (13.27)  
    - Note: Conceptually would include nonlife insurance transactions, but these are excluded on practical grounds. (13.27)
  - (c) Total remittances and transfers to NPISHs (from the perspective of the recipient economy):  
    - Total remittances receivable;  
    - + Current transfers receivable by NPISHs;  
    - + Capital transfers receivable by NPISHs. (13.27)
- Workers’ remittances are a supplementary sub-item of personal transfers that include only current transfers by migrants who are employed in new economies and considered residents there (see paragraph A4.17) (13.22).

### Lotteries and gambling (paragraphs 13.25–13.26)
- Payments for lottery tickets or bets consist of:  
  - (a) a service charge to the unit organizing the lottery or gambling (paragraph [10.171]); and  
  - (b) current transfers payable from gamblers to winners and, in some cases, to charities. The transfers are regarded as taking place directly from participants to winners and charities, not recorded as transfers to or by the unit operating the lottery or gambling (13.25).
- Some of the service charge at purchasers’ prices may include gambling taxes, shown as payable by the operator, not the customers (13.25).
- When nonresident households gamble, net transfers between residents and nonresidents may arise. If a lottery winner receives a stream of payments, the receipt should be recorded as a current transfer equal to the present value of the payment stream together with the immediate purchase of an annuity; recording of annuities is described in paragraphs [A6c.29–A6c.35] (13.26).

### Current taxes on income, wealth, etc. (paragraphs 13.28–13.31)
- Current taxes on income, wealth, etc., in the balance of payments consist mainly of taxes levied on income earned by nonresidents from labor or financial assets; taxes on capital gains arising from assets of nonresidents are also included (13.28).
- Taxes on wages and salaries earned by nonresident employees are recorded as payable by the nonresident employees (13.28).
- Taxes on interest and dividends are recorded as payable by the recipients; taxes on financial transactions payable by nonresidents are current transfers (13.28).
- If such taxes have been classified as other taxes on products and production in the national accounts, by convention they may be recorded in the earned income account in the international accounts for consistency (13.28).
- Taxes on rent and ownership of land are treated as payable by resident producers or resident notional institutional units and generally should not be recorded in the balance of payments (13.28).
- Inheritance taxes are treated as capital transfers (13.28).
- Refunds of taxes to taxpayers are treated as negative taxes, reducing the amount of taxes (13.28).
- Specific permission fees (licenses, permits, certificates): if compulsory and nontransferable, generally considered taxes; if payment is requited and a service commensurate with the payment is consumed, recorded as a sale of a service. If the license issuance involves regulatory functions (checking competence, safety, etc.), payments should be treated as purchases of services from government rather than taxes, unless payments are not broadly proportional to costs (13.30).
- Fines or penalties on late payment of taxes are included in the amount of associated taxes (13.31).

### Social contributions and pension-related adjustments (paragraphs 13.32–13.39, 13.35–13.36)
- Social contributions are actual or imputed contributions made by households payable to social insurance schemes to provide for social benefits (13.32).
- Schemes include social security schemes and employment-related schemes (funded and unfunded pension schemes); employer-independent schemes that establish separate institutional units may also qualify (13.32).
- In the balance of payments, social contributions are recorded when a resident makes contributions to social security and other pension schemes in another economy for employment in that economy, or when a nonresident employer makes actual or imputed contributions on behalf of the employee. Employer social contributions are included in remuneration of employees (13.32a).
- For social security schemes, the amount recorded in the secondary transfer income account includes actual contributions payable by employers and employees; because employerpayable amounts are included in compensation, the total of social contributions payable to social security schemes is recorded as a transfer payable by employees (13.33).
- Calculation of contributions to other social insurance/pension schemes involves contribution supplements (investment income payable on pension entitlements) and service charges; treatment is designed to treat social insurance transactions simultaneously as income distribution and financial transactions (13.34).
- Total social contributions, less service charges to pension schemes, are determined as:  
  - Employers’ actual contributions;  
  - + Employers’ imputed contributions;  
  - + Policyholders’ actual contributions;  
  - + Contribution supplements corresponding to investment income payable by pension schemes on pension entitlements;  
  - – Service charges payable to pension schemes. (13.35)
- Employers’ actual and imputed contributions are rerouted through employees (explanation in paragraph [3.16]) (13.36).
- Pension entitlements are claims of beneficiaries on funds; payments of social contributions into pension schemes and receipt of pensions constitute acquisition and disposal of financial assets and are recorded as current transfers (social contributions and social benefits) so that household disposable incomes reflect these flows (13.37).
- An adjustment item, “adjustment for change in pension entitlements,” reconciles the treatment of pensions as current transfers with pension entitlements as financial assets. It equals:  
  - total social contributions less service charges (the total value of actual social contributions payable into pension schemes);  
  - + total value of contribution supplements payable out of property income attributed to pension fund beneficiaries;  
  - – value of associated service charges;  
  - – total value of pensions paid out as social benefits by pension schemes.  
  - (Changes arising from capital transfers are not included.) (13.38)
- When cross-border flows of pension contributions and pension benefits are significant, the adjustment item must be recorded to reconcile current and financial accounts: added to the balance on secondary transfer income for the economy of the employees/policyholders (credit) and deducted for the economy of the pension schemes (debit). When cross-border flows are minor, the adjustment item may be omitted (13.39).

### Social benefits (paragraph 13.40)
- Social benefits are current transfers receivable by households intended to provide for needs arising from events or circumstances (sickness, unemployment, retirement, housing, education, family circumstances) and include pension and nonpension benefits payable under social security and other social insurance schemes (13.40).
- Social benefits include cash or in-kind benefits payable by government units or NPISHs to meet the same needs as social insurance schemes but not made under a social insurance scheme (social assistance) (13.40).
- Cross-border social benefits may be significant where a significant number of residents have or had employment in other economies (13.40).

### Nonlife insurance premiums less service charges (paragraph 13.41)
- Net nonlife insurance premiums and net premiums on standardized guarantees are described in paragraphs 12.42 and 12.43 (13.41).
- Net nonlife insurance premiums less service charges are derived from total nonlife insurance premiums and premium supplements after deducting the service charges; only the net nonlife insurance premiums constitute current transfers (13.41).

*International Monetary Fund — BPM7 Chapter 13, Transfer Income Account*

### Chapter 12Chapter 13 Transfer Income Account Secondary Transfer Income Account

### Chapter 12Chapter 13 Transfer Income Account Secondary Transfer Income Account

### Nonlife insurance premiums and premium supplements (paragraphs 13.42–13.42a)
- Nonlife insurance premiums are "the actual amounts payable to the direct insurer or reinsurer to secure insurance cover for a specific event over a stated Ɵme period" (paragraph 13.42).
- Nonlife insurance premium supplements consist of "the investment income earned from the investment of the (nonlife) insurance technical reserves" (paragraph 13.42).
- The total of nonlife insurance premiums and premium supplements must cover:
  - payments of service charges to insurance enterprises for arranging the insurance, and
  - payments for the insurance itself (paragraph 13.42).
- After deducting service charges (calculation explained in paragraph [10.111]), the remainder is "net nonlife insurance premiums less service charges" — amounts available to provide cover against events causing damage or loss (paragraph 13.42).
- Hybrid insurance products (paragraph 13.42a):
  - If a hybrid product is allocated to nonlife insurance, then the full amount of premiums less service charges is recorded in the transfer income account.
  - If a hybrid product is allocated to life insurance, no part of premiums less service charges is recorded in the transfer income account; instead, premiums less service charges are recorded in the financial account.

### Standardized guarantees and their treatment (paragraph 13.43)
- Standardized guarantees: guarantees issued in large numbers, for small amounts, with identical conditions, and where the probability of default can be well established (paragraph 13.43).
- Standardized guarantees have the same characteristics as nonlife insurance when many guarantees of the same sort are issued and a realistic estimate of overall claims is possible (paragraph 13.43).
- Fees payable and investment income on technical provisions for calls are treated like nonlife insurance premiums and premium supplements; calls under the guarantees are treated like nonlife insurance claims (paragraph 13.43).
- Net premiums less service charges on standardized guarantees are derived from total premiums and premium supplements after deducting service charges (paragraph 13.43).

### Nonlife insurance claims and calls under standardized guarantees (paragraphs 13.44–13.46, 13.45a)
- Nonlife insurance claims:
  - Amounts payable in settlement of injuries or damages that result from an event covered by a nonlife insurance (or reinsurance) policy (paragraph 13.44).
  - Claims become due when the eventuality occurs that gives rise to a valid claim; equal to claims paid within the accounting period plus changes in technical reserves against outstanding claims (paragraph 13.44).
  - Nonlife reinsurance claims are calculated and recorded in the same way as direct nonlife insurance (paragraph 13.44).
- Timing and classification:
  - Nonlife insurance claims are treated as transfers to the claimant that accrue at the time the insured event occurs (paragraph 13.45).
  - Insurance claims have mixed current and capital elements. As a convention, cross-border nonlife insurance claims are generally treated as current transfers, except for major catastrophic events where some proportion may be recorded as capital transfers (see paragraph [13.24 in BPM7 Ch 14]) (paragraph 13.45).
- Hybrid products (paragraph 13.45a):
  - Treatment of claims and benefits on hybrid insurance products depends on allocation to life or nonlife, consistent with the treatment of net premiums on hybrid products (see paragraph 13.42a).
- Claims and calls payable under standardized guarantees and government schemes where payments into the scheme are treated as nonlife insurance premiums are recorded under this item in the secondary transfer income account (paragraph 13.46).

### Current international cooperation (paragraphs 13.47–13.51)
- Definition: Current international cooperation consists of current transfers in cash or in kind between governments of different countries or between governments and international organisations (paragraph 13.47).
- Included items (paragraph 13.47):
  - (a) Transfers between governments used by recipients to finance current expenditures, including emergency aid after natural disasters; includes transfers in kind such as food, clothing, blankets, medicines.
  - (b) Annual or other regular contributions paid by member governments to international organisations (excluding taxes payable to supranational organisations) and regular transfers by international organisations to governments.
  - (c) Payments by governments or international organisations to cover salaries of technical assistance staff deemed resident in the host economy and in an employer-employee relationship with the host government; includes technical assistance supplied in kind.
- Exclusions and classification:
  - Transfers intended for capital formation are recorded as capital transfers (paragraph 13.47).
  - Contributions that give rise to equity are acquisitions of shares or other equity (paragraph 13.47).
- External aid via nonresident entities created to undertake fiscal functions is considered current international cooperation (paragraphs 13.48 and 8.24–8.26).
- Valuation of in-kind assistance:
  - Goods and services acquired from market producers and provided without charge should be valued at market prices (prices paid by purchasers) (paragraph 13.49).
  - Transfers in kind produced by international organisations, governments, or NPISHs should be valued on a cost-of-production basis (paragraph 13.49).
- Technical assistance generally has characteristics of current transfers; technical assistance tied to or part of capital projects is classified as capital transfers (paragraph 13.50).
- Concessional loans:
  - Loans with concessional interest rates could be seen as providing a current transfer equal to the difference between actual interest and market-equivalent interest (paragraph 13.51).
  - Appropriate treatment in SNA and international accounts is unresolved; until agreed, information on concessional debt may be provided as supplementary information showing benefits as one-off transfers at loan origination equal to the difference between nominal debt and its present value using a relevant market discount rate (paragraph 13.51).
  - The supplementary-information approach is recommended for official lending intended to convey a benefit and occurring in a noncommercial setting (usually government-to-government); commercial situations are treated differently (paragraph 13.51).

### Miscellaneous current transfers (paragraphs 13.52–13.58)
- Definition: Miscellaneous current transfers include all current transfers, in cash or in kind, other than personal transfers; current taxes on income, wealth, etc.; social contributions; social benefits; net nonlife insurance premiums and claims; and current international cooperation (paragraph 13.52).
- Current transfers to NPISHs (paragraph 13.53):
  - Transfers received by resident NPISHs from nonresident institutional units as membership dues, subscriptions, donations, whether regular or occasional.
  - Grants and donations between NPISHs generally classified as current transfers (e.g., donations for relief works).
- Fines and penalties (paragraphs 13.54–13.54a):
  - Fines and penalties imposed by courts of law or quasi-judicial bodies are treated as miscellaneous current transfers, except when intended to compensate for injury or damage, in which case they should be considered compensation payments and recorded as current or capital transfers as appropriate (paragraph 13.54).
  - Early or late repayment penalties agreed as part of original contract are not included in current transfers; they should be treated with the associated good, service, or income.
  - Contractual contingent fines or penalties in mergers and acquisitions that effectively adjust the market price of an acquired enterprise are treated as direct investment transactions (or portfolio investment if the buyer has less than 10 percent voting power), not as current transfers (paragraph 13.54a).
- Compensation payments (paragraphs 13.55–13.56):
  - Compensation payments are current transfers paid in compensation for injury to persons or damage to property not settled as nonlife insurance claims; may be compulsory (court-awarded) or out-of-court settlements (paragraph 13.55).
  - Major compensation payments for extensive damages (e.g., oil spillages or side effects of pharmaceutical products or anti-competitive behavior) are treated as capital rather than current transfers (paragraph 13.56).
- Nonrefundable contributions under citizenship-by-investment programs (paragraph 13.56a):
  - Nonrefundable contributions by nonresident individuals to governments, nominated development funds, or NPISHs are recorded as transfers.
  - If not intended for capital investment projects, they are treated as current transfers.
  - Such contributions are not identified separately in the balance of payments, but countries where these programs are important can publish a supplementary item within other miscellaneous current transfers (paragraph 13.56a).
- Other (paragraphs 13.57–13.58):
  - Gifts and donations of a current nature not included elsewhere are regarded as current transfers (paragraph 13.57).
  - Membership dues or subscriptions to market nonprofit organisations serving businesses (e.g., chambers of commerce or trade associations) are treated as payments for services rendered and are not transfers (paragraph 13.57).
  - Payments to international or supranational authorities that are compulsory, for which nothing is provided in return, but which are not taxes, are classified as miscellaneous transfers (paragraph 13.58).

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/bpm7-chapter-13-v7-transfer-income-account.pdf_