## Chapter 1314 Capital Account

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### A. Concepts and Coverage
- Reference: 2008 2025 SNA, Chapter 1011, The Capital Account. (13.14.1)
- Definition:
  - The capital account in of the internationalexternal accounts shows (a) capital transfers receiva- ble and payable between residents and nonresidents and (b) the acquisition and disposal of nonproduced, nonfi- nancial assets between residents and nonresidents. (13.14.1)
- Overview and balancing:
  - The balance on the capital ac- count shows the total credits less debits (or revenues less expenditures) for capital transfers and nonproduced, nonfinancial assets. (13.14.2)
  - The sum of the current and capital account balances can also be shown as a balancing item labeled as net lending (+)/net borrowing (–) from the capital and current accounts, conceptually equal to net lending (+)/net borrowing (–) from the financial account. (13.14.2)
- Terminology and consistency with SNA:
  - The Manual distinguishes between capital transactions and financial transactions; the term “capital account” here aligns with the SNA. (13.14.3)
  - Difference from SNA: the SNA capital account shows capital formation for produced and nonproduced assets, while the international external accounts show only transactions in nonproduced, nonfinancial assets because transactions in produced assets are included in the goods and services accounts. (13.14.4)
- Relationship to saving and sectoral net lending:
  - Net lending (+)/net borrowing (–) in the international external accounts is conceptually the same as the aggregate of net lending/net borrowing of the domestic sectors in the SNA and equal to the opposite of net lending/net borrowing of the rest of the world sector in the SNA. (13.14.5)
  - Relationship (as shown in the SNA capital account):
    - Net lending (+)/net borrowing (–)
      = Saving;
      – Acquisition of nonproduced, nonfinancial assets;
      + Disposal of nonproduced, nonfinancial assets;
      + Capital transfers receivable;
      – Capital transfers payable. (13.14.5)
- Recording principles and timing:
  - Acquisitions and disposals recorded at time of change of ownership; capital transfers recorded when recipient has an unconditional claim (e.g., court judgment or administrative ruling); if subject to appeal, record when appeal is resolved. Complex eligibility conditions may require recording at time of cash payment, asset conveyance, or liability cancellation if recipient never has a claim. (13.14.6)
  - Acquisitions/disposals and capital transfers are recorded on a gross basis, not netted. (13.14.7)
- Expository components (Table 13.14.1): acquisitions/disposals of nonproduced, nonfinancial assets (natural resources; contracts, leases, and licenses; marketing assets; crypto assets without a corresponding liability designed as a medium of exchange); capital transfers (debt forgiveness; capital taxes; investment grants; other capital transfers; nonlife insurance claims; one-off guarantees and debt assumption; other); capital account balance; Net lending (+)/net borrowing (–). (Table 13.14.1 note)

### B. Acquisitions and Disposals of Nonproduced, Nonfinancial Assets
- Reference: 2008 SNA, Chapter 10, The Capital Account, and Chapter [13, The Balance Sheet]. (13.14.8)
- Asset categories (13.14.8):
  1. natural resources;
  2. contracts, leases, and licenses;
  3. marketing assets (and purchased goodwill);
  4. crypto assets without a corresponding liability designed as a medium of exchange.
- 1. Natural resources:
  - Include land, mineral rights, forestry rights, water, fishing rights, air space, and electromagnetic spectrum; environmental assets without enforceable ownership rights (e.g., open seas, air) are excluded. International transactions in land and other immovables rarely arise because notional resident units are generally identified as owners; purchases and sales are generally resident-to-resident. Rights to use a natural resource temporarily are classified as rent or as a contract/lease/license if they amount to an economic asset. (13.14.9–13.14.10)
  - Notional unit split case: a notional unit may be identified where ownership is split between entities and both are entitled to future economic benefits. (14.9a)
  - International transactions in land arise for enclaves of international organisations and foreign governments, voluntary changes of sovereignty, and associated equipment/buildings shown separately in goods/services accounts if practical. (13.14.10)
- 2. Contracts, leases, and licenses:
  - Definition: non-produced assets where one party can legally and practically realize the price difference between market price and contract price; creations of society/legal system; sometimes called intangible assets. Examples include marketable operating leases; permissions to use natural resources not recorded as ownership; permissions to undertake activities; entitlements to purchase exclusively if marketable. Transactions are recorded in the capital account; holdings are not recorded in the IIP because there is no counterpart liability. (13.14.11)
  - Marketable operating leases are treated as an asset when lease specifies a predetermined price that differs from market; recorded in capital account when lessee sells the right and realizes the price difference. (13.14.12)
  - Exclusions/examples not covered: short-term nontransferable use rights → rent; government permission not meeting economic asset definition → tax or service; ownership/temporary use of intellectual property products → service; sale of franchises/trademarks → marketing assets; financial lease → loan and change of economic ownership; operating lease for produced asset → service. (13.14.13; cross-refs)
  - Emissions permits: purchase from a resident government by a nonresident enterprise generally classified as cross-border tax on production, except when part of direct investment or when extensive services are provided; if tradable and resold by a resident to a nonresident, recorded under contracts, leases, and licenses in the capital account (unless direct investment). International environmental cleanup/improvement expenditures usually recorded as services. (13.14 emissions / environmental notes)
  - Entitlements to future goods/services on an exclusive basis may be an asset if transferable (examples: sports player transfer fees, exclusive publishing/recording rights, transferable contract to acquire a good/service at a fixed future price); such assets may rarely have negative value. (13.14.15)
  - NFTs:
    - NFTs are digital records on a blockchain associated with an asset but distinct from that asset. Three types of rights embedded in NFTs, only one recorded in the capital account:
      - NFTs granting limited commercial rights enabling economic benefits (e.g., royalties) → recorded under contracts, leases and licenses in the capital account.
      - NFTs conveying no ownership rights and only allowing personal use → recorded under services. (paragraph [11.xx])
      - NFTs granting full ownership rights to another asset/product need not be recorded in external accounts separately because the underlying asset transaction is recorded. (14.15a)
  - Time-share arrangements fall under contracts/leases/licenses. (13.16)
- 3. Marketing assets (and purchased goodwill):
  - Marketing assets comprise the capitalized value of advertising/promotional expenditures (brand names, mastheads, trademarks, logos, domain names). When sold separately, recorded as acquisitions/disposals of nonproduced, nonfinancial assets. Marketing assets included with purchased goodwill in the 2008 2025 SNA asset categories; goodwill usually implicit in takeover purchase price and cannot be separately identified and sold. (13.14.17)
  - Internet domain names: normal registration fees → service; premium domain value in excess of basic fee → license included under marketing assets. Designing a new logo → business service; acquiring an existing logo → marketing assets. (13.14.18)
- 4. Crypto assets without a corresponding liability designed as a medium of exchange:
  - Definition: digital representations of value using cryptography and distributed ledger technology; crypto assets without a corresponding liability are those with no issuer and include fungible crypto assets designed as a medium of exchange within a platform or more broadly. These are recorded as nonproduced nonfinancial assets (not financial assets) because there is no counterpart liability. (14.18a)
  - Characteristics and recording:
    - Such crypto assets may be held as store of value but derive value from expectation of use as a medium of exchange. (14.18a)
    - Fungible crypto assets are divisible and not unique. (14.18b)
    - Cross-border purchases of such crypto assets as an investment are recorded in the capital account as credits/revenues for the selling economy and debits/expenditures for the purchasing economy. (14.18c)
    - Cross-border transactions in goods or services paid using such crypto assets are recorded as import/export in goods or services accounts and a corresponding amount in the capital account as credit/revenue or debit/expenditure. (14.18d)
    - Validation of transactions relating to crypto assets discussed in [Box 11.x]. (14.18e)
    - Classification of crypto assets without counterpart liability designed as a medium of exchange is on the SNA and BPM research agendas due to evolving uses and regulation. (14.18f)

### C. Capital Transfers
- Reference: 2008 2025 SNA, Chapter 1110, The Capital Account, Section F. (13.14.19)
- Definition and scope:
  - Capital transfers are unrequited transactions, in cash or in-kind, in which the ownership of an asset (other than cash or inventories) changes; or which oblige one or both parties to acquire or dispose of an asset (other than cash or inventories); or where a liability is forgiven by the creditor. (13.14.19)
  - Governments, households, and nonprofit institutions undertake transfers to convey a benefit to another party. (13.14.19)
- Transfers from enterprises:
  - May consist of compulsory transfers to governments or other units under court orders, or voluntary transfers to nonprofit institutions and other entities. Commercial entities only rarely make capital transfers to other commercial entities (examples: debt assumption, activation of one-off guarantees, nonlife insurance claims, compensation payments). (13.14.20)
- Imputed capital transfers:
  - May arise from government use for fiscal purposes of entities resident in other economies. (13.14.21)

#### Debt forgiveness (13.14.22–13.14.23)
- Definition:
  - Debt forgiveness is "the voluntary cancellation of all or part of a debt obligation within a contractual agreement between a creditor and a debtor." (13.14.22)
  - It arises from an agreement between the parties and "has the intention to convey a benefit," in contrast to debt write-offs which are unilateral recognitions that an amount can no longer be collected. (13.14.23)
- Scope of cancellation:
  - Covers cancellation or forgiveness of all or part of the principal amount outstanding, including interest arrears and any other interest costs that have accrued; does not arise from cancellation of future interest payments that have not yet fallen due and have not yet accrued. (13.14.22)
  - Special cases include forgiveness of principal of a credit-linked note arising from an event affecting the entity on which the embedded credit derivative was written, and forgiveness of principal that arises when a type of event contractually specified in the debt contract occurs. (footnote to 13.14.22)
- Recording:
  - Debt forgiveness is recorded as a capital transfer transaction. (13.14.23)
  - Unilateral writing off of debt or repudiation of debt is not a transaction and is recorded as other changes in volume in the other changes in financial assets and liabilities account, not as an entry in the capital account or financial account. (13.14.23)

#### Capital taxes (13.14.28 / 13.28)
- Definition:
  - "Capital taxes consist of taxes levied at irregular and infrequent intervals on the values of the assets or net worth owned by institutional units or on the values of assets transferred between institutional units as a result of legacies, gifts inter vivos, or other transfers." (13.14.28 / 13.28)
- Components:
  - (a) Capital levies: taxes on values of assets or net worth levied at irregular, and very infrequent, intervals of time. (13.14.28 / 13.28)
  - (b) Taxes on capital transfers: taxes on the values of assets transferred between institutional units, consisting mainly of inheritance taxes (death duties) and gift taxes, including intra-family gifts made to avoid or minimize inheritance taxes; they do not include taxes on sales of assets. (13.14.28 / 13.28)
- Classification guidance:
  - Recurrent taxes on income and wealth and taxes on financial and capital transactions are classified as current transfers. (13.14.28 / 13.28)
  - Detail on classification is in the Government Finance Statistics Manual 2001. (13.14.28 / 13.28)

#### Nonlife insurance claims (13.14.24)
- General rule:
  - Nonlife insurance claims are normally classified as current transfers. (13.14.24)
- Exceptional cases and reporting:
  - For exceptionally large claims (e.g., following a catastrophe or major disaster at national level), some part of claims may be recorded as capital transfers rather than normal current transfers. (13.14.24)
  - Practical convention: "all cross-border nonlife insurance claims are classified as current transfers, unless it is necessary to record a capital transfer to be consistent with the national accounts." (13.14.24)
  - Reporting advice: a supplementary item should be provided for insurance claims included in capital transfers to allow comparability with partner data. (13.14.24)

#### Investment grants (13.14.25–13.14.26)
- Definition and recipient obligations:
  - "Investment grants consist of capital transfers in cash or in kind made by governments [or international organizations] to other institutional units to finance all or part of the costs of their acquiring fixed assets." Recipients are obliged to use cash investment grants for gross fixed capital formation; grants are often tied to specific investment projects. (13.14.25)
- Distinction from direct investment:
  - If a foreign government funds an investment project as a direct investor, the amount is classified as equity in a direct investment enterprise; a direct-investment stake is distinguished by ownership of voting power and a right to future benefits (e.g., dividends or sale rights). (13.14.25)
- Payment profile and in-kind grants:
  - Investment grants in cash paid in installments for long projects continue to be classified as capital transfers across accounting periods. (13.14.26)
  - Investment grants in kind include transfers of transport equipment, machinery, provision of buildings or other structures for nonresident units; transfers of military equipment classified as fixed assets are included. (13.14.26)

#### One-off guarantees and other debt assumption (13.14.27)
- Capital transfer event:
  - A capital transfer occurs when a one-off guarantee is activated and the guarantor acquires no claim on the debtor or a claim worth less than the value of the guarantee; the same applies where the debt-assuming party is not a guarantor. (13.14.27)
- Direction of transfer:
  - If the original debtor still exists, the capital transfer is from the debt-assuming party (assumer) to the debtor. If the original debtor no longer exists, the capital transfer is from the assumer to the creditor. (13.14.27)
- Valuation of any claim:
  - The value of any claim the debt-assuming party receives from the debtor (e.g., a promise of reimbursement) is treated as a financial account transaction between the guarantor and the debtor. (13.14.27)

#### Other capital transfers and large nonrecurrent compensations (13.14.27a; 13.14.29–13.14.35, 14.35a)
- Definition:
  - Other capital transfers are capital transfers other than investment grants, capital taxes, and debt forgiveness. (14.27a)
- Major nonrecurrent compensations:
  - Payments in compensation for extensive damages or serious injuries not covered by insurance that are intended to recover losses over a multi-year period or to replace a nonfinancial or financial asset are included in capital transfers. Examples: compensation for major explosions, oil spillages, side effects of pharmaceutical products, and anti-competitive behavior. If a court-ordered or settled amount is identifiable to a specific unpaid debt, record under the relevant financial account item. (13.14.29)
- Assets of persons changing economic territory of residence are other changes in volumes, not imputed as transfers. (13.14.30)
- Large gifts and inheritances:
  - Capital transfers include large gifts and inheritances (legacies), including those to nonprofit institutions, whether under wills or inter vivos; also include exceptionally large donations to finance gross fixed capital formation. Cash grants from donor governments or multilateral financial institutions to debtor economies to be used to repay debt are capital transfers. (13.14.31)
- Capital contributions to international organizations or nonprofit institutions are capital transfers if they do not give rise to equity for the provider. (13.14.32)
- Concessional lending:
  - The transfer element of concessional loans can be shown as a capital transfer at inception as supplementary data, but no adjustment is made to recording of the loan or interest in core external sector statistics. (13.14.33)
- Bailouts:
  - If a government buys assets for more than their market value as part of a bailout, the sale and purchase of the asset should be recorded at market value and a capital transfer recorded for the difference between the market price and the total amount paid. (13.14.34)
- Household-to-household capital transfers:
  - These may be identified separately when significant and are included in the supplementary item personal remittances. (13.14.35)
- Citizenship/passport-for-contribution programs:
  - Nonrefundable economic contributions specifically earmarked for capital investment projects made to obtain citizenship or passports should be recorded as capital transfers; countries may publish a supplementary item within other capital transfers where these contributions are important. (14.35a)

*Source: Chapter 1314 Capital Account (IMF draft chapter text).*

### Chapter 1314 Capital Account

### Chapter 1314 Capital Account

### A. Concepts and Coverage
- Reference: 2008 2025 SNA, Chapter 1011, The Capital Account.
- Definition:
  - The capital account in of the internationalexternal accounts shows (a) capital transfers receiva- ble and payable between residents and nonresidents and (b) the acquisition and disposal of nonproduced, nonfi- nancial assets between residents and nonresidents. (13.14.1)
- Overview:
  - The balance on the capital ac- count shows the total credits less debits (or revenues less expenditures) for capital transfers and nonproduced, nonfinancial assets. (13.14.2)
  - The sum of the current and capital account balances can also be shown as a balancing item labeled as net lending (+)/net borrowing (–) from the capital and current accounts, conceptually equal to net lending (+)/net borrowing (–) from the financial account (see paragraph [8.4]). (13.14.2)
- Terminology and consistency with SNA:
  - The Manual distinguishes between capital transactions and financial transactions; the term “capital account” here aligns with the SNA (13.14.3).
  - Difference from SNA: the SNA capital account shows capital formation for produced and nonproduced assets, while the international external accounts show only transactions in nonproduced, nonfinancial assets because transactions in produced assets are included in the goods and services accounts. (13.14.4)
- Relationship to saving and sectoral net lending:
  - The value of net lending/net borrowing in the internaƟonal external accounts is conceptually the same as the aggregate of net lending/net borrowing of the domestic sectors in the SNA and equal to the opposite of net lending/net borrowing of the rest of the world sector in the SNA. (13.14.5)
  - Relationship (as shown in the SNA capital account):
    - Net lending (+)/net borrowing (–)
      = Saving;
      – Acquisition of nonproduced, nonfinancial assets;
      + Disposal of nonproduced, nonfinancial assets;
      + Capital transfers receivable;
      – Capital transfers payable. (13.14.5)
- Recording principles and timing:
  - Acquisitions and disposals recorded at time of change of ownership; capital transfers recorded when recipient has an unconditional claim (e.g., court judgment or administrative ruling). If subject to appeal, record when appeal is resolved. Complex eligibility conditions may require recording at time of cash payment, asset conveyance, or liability cancellation if recipient never has a claim. (13.14.6)
  - Acquisitions/disposals and capital transfers are recorded on a gross basis, not netted. (13.14.7)
- Expository overview (Table 13.14.1) components include:
  - Acquisitions (debits/expendituresdr.)/disposals (credits/revenues.) of nonproduced, nonfinancial assets: natural resources; contracts, leases, and licenses; marketing assets; crypto assets without a corresponding liability designed as a medium of exchange.
  - Capital transfers: debt forgiveness; capital taxes; investment grants; other capital transfers; nonlife insurance claims; one-off guarantees and debt assumption; other.
  - Capital account balance; Net lending (+)/net borrowing (–) (from current and capital accounts). (Table 13.14.1 note)

### B. Acquisitions and Disposals of Nonproduced, Nonfinancial Assets
- Reference: 2008 SNA, Chapter 10, The Capital Account, and Chapter [13, The Balance Sheet]. (13.14.8)
- Asset categories (13.14.8):
  1. natural resources;
  2. contracts, leases, and licenses;
  3. marketing assets (and purchased goodwill);
  4. crypto assets without a corresponding liability designed as a medium of exchange.
- 1. Natural resources:
  - Include land, mineral rights, forestry rights, water, fishing rights, air space, and electromagnetic spectrum. Environmental assets without enforceable ownership rights (e.g., open seas, air) are excluded. International transactions in land and other immovables rarely arise because notional resident units are generally identified as owners; purchases and sales are generally resident-to-resident. Rights to use a natural resource temporarily are classified as rent or as a contract/lease/license if they amount to an economic asset. (13.14.9)
  - Notional unit split case: a notional unit may be identified where ownership is split between entities and both are entitled to future economic benefits (see paragraphs [12.xx-12.yy]). (14.9a)
  - International transactions in land arise for enclaves of international organisations and foreign governments, voluntary changes of sovereignty, and associated equipment/buildings shown separately in goods/services accounts if practical. (13.14.10)
- 2. Contracts, leases, and licenses:
  - Definition: non-produced assets where one party can legally and practically realize the price difference between market price and contract price; creations of society/legal system; sometimes called intangible assets. Examples: marketable operating leases; permissions to use natural resources not recorded as ownership; permissions to undertake activities; entitlements to purchase exclusively if marketable. Transactions recorded in the capital account; holdings not recorded in the IIP because there is no counterpart liability. (13.14.11)
  - Marketable operating leases treated as an asset when lease specifies a predetermined price that differs from market; recorded in capital account when lessee sells the right and realizes the price difference. (13.14.12)
  - Owners of other licenses/permissions acquire rights to make profits at least equal to amount paid; on-selling to non-residents recorded in the capital account. (14.12a)
  - Examples not covered (13.14.13):
    - Short-term, nontransferable use rights → rent (paragraphs [11.85–11.90]).
    - Government permission that does not meet economic asset definition → tax or, in limited cases, a service (paragraphs [10.180–10.181 and 12.30]).
    - Ownership or temporary use of intellectual property products → service (or sometimes goods); sale of franchises/trademarks → marketing assets (paragraph [Ta b l e 1011.4]).
    - Financial lease → loan and change of economic ownership (paragraphs [5.56–5.60]); operating lease for produced asset → service (paragraphs [10.153–10.157]).
  - Emissions permits:
    - Purchase of an emission permit from a resident government by a nonresident enterprise generally classified as cross-border tax on production, except when part of establishing direct investment (rerouted as equity investment) or when extensive services are provided (classified as services). (13.14, emissions bullet)
    - If tradable, an emission permit is an economic asset; resale by a resident to a nonresident is recorded under contracts, leases, and licenses in the capital account (unless direct investment). (13.14, emissions bullet)
  - International expenditures for environmental cleanup/improvement are usually recorded as services. (13.14, environmental note)
  - Entitlements to future goods/services on an exclusive basis may be an asset if transferable (examples: sports player transfer fees, exclusive publishing/recording rights, transferable contract to acquire a good/service at a fixed future price). Such assets may rarely have negative value. (13.14.15)
  - NFTs:
    - NFTs are digital records on a blockchain associated with an asset but distinct from that asset. Three types of rights embedded in NFTs, only one recorded in the capital account:
      - NFTs granting limited commercial rights enabling economic benefits (e.g., royalties) → recorded under contracts, leases and licenses in the capital account.
      - NFTs conveying no ownership rights and only allowing personal use → recorded under services (paragraph [11.xx]).
      - NFTs granting full ownership rights to another asset/product need not be recorded in external accounts separately because the underlying asset transaction is recorded. (14.15a)
  - Time-share arrangements are another example falling under contracts/leases/licenses (paragraph 10.100(c)). (13.16)
- 3. Marketing assets (and purchased goodwill):
  - Marketing assets: capitalized value of advertising/promotional expenditures (brand names, mastheads, trademarks, logos, domain names). When sold separately, recorded as acquisitions/disposals of nonproduced, nonfinancial assets. Marketing assets included with purchased goodwill in the 2008 2025 SNA asset categories; goodwill usually implicit in takeover purchase price and cannot be separately identified and sold. (13.14.17)
  - Internet domain names: normal registration fees → service; premium domain value in excess of basic fee → license included under marketing assets. Designing a new logo → business service; acquiring an existing logo → marketing assets. (13.14.18)
- 4. Crypto assets without a corresponding liability designed as a medium of exchange:
  - Definition: digital representations of value using cryptography and distributed ledger technology; crypto assets without a corresponding liability are those with no issuer and include fungible crypto assets designed as a medium of exchange within a platform or more broadly. These are recorded as nonproduced nonfinancial assets (not financial assets) because there is no counterpart liability. (14.18a)
  - Characteristics and recording:
    - Such crypto assets may be held as store of value but derive value from expectation of use as a medium of exchange. (14.18a)
    - Fungible crypto assets are divisible and not unique. (14.18b)
    - Cross-border purchases of such crypto assets as an investment are recorded in the capital account as credits/revenues for the selling economy and debits/expenditures for the purchasing economy. (14.18c)
    - Cross-border transactions in goods or services paid using such crypto assets are recorded as import/export in goods or services accounts and a corresponding amount in the capital account as credit/revenue or debit/expenditure. (14.18d)
    - Validation of transactions relating to crypto assets discussed in [Box 11.x]. (14.18e)
    - Classification of crypto assets without counterpart liability designed as a medium of exchange is on the SNA and BPM research agendas due to evolving uses and regulation. (14.18f)

### C. Capital Transfers
- Reference: 2008 2025 SNA, Chapter 1110, The Capital Account, SecƟon F. (13.14.19)
- Definition and scope:
  - Capital transfers are unrequited transactions, in cash or in-kind, in which the ownership of an asset (other than cash or inventories) changes; or which oblige one or both parties to acquire or dispose of an asset (other than cash or inventories); or where a liability is forgiven by the creditor. (13.14.19)
  - Governments, households, and nonprofit institutions undertake transfers to convey a benefit to another party. (13.14.19)
- Transfers from enterprises:
  - May consist of compulsory transfers to governments or other units under court orders, or voluntary transfers to nonprofit institutions and other entities. Commercial entities only rarely make capital transfers to other commercial entities (examples: debt assumption, activation of one-off guarantees, nonlife insurance claims, compensation payments). (13.14.20)
- Imputed capital transfers:
  - May arise from government use for fiscal purposes of entities resident in other economies (see paragraphs [8.24–8.26]). (13.14.21)

*Source: Chapter 1314 Capital Account (IMF draft chapter text).*

### 1. Debt forgiveness

### Chapter 14 — Capital Account (Selected topics)

### Debt forgiveness (13.14.22–13.14.23)
- The chapter defines debt forgiveness as "the voluntary cancellation of all or part of a debt obligation within a contractual agreement between a creditor and a debtor." (13.14.22)
- Debt forgiveness arises from an agreement between the parties and "has the intention to convey a benefit," in contrast to debt write-offs which are unilateral recognitions that an amount can no longer be collected. (13.14.23)
- Scope of cancellation: contractual arrangement cancels or forgives all or part of the principal amount outstanding, including interest arrears and any other interest costs that have accrued; it does not arise from the cancellation of future interest payments that have not yet fallen due and have not yet accrued. (13.14.22)
- Special cases noted (footnote): includes forgiveness of principal of a credit-linked note arising from an event affecting the entity on which the embedded credit derivative was written, and forgiveness of principal that arises when a type of event contractually specified in the debt contract occurs. (footnote to 13.14.22)
- Treatment in accounts:
  - Debt forgiveness is recorded as a capital transfer transaction. (13.14.23)
  - The unilateral writing off of debt or repudiation of debt is not a transaction and is recorded as other changes in volume in the other changes in financial assets and liabilities account, not as an entry in the capital account or financial account. (13.14.23)
  - References for additional information: [Appendix 1] on exceptional financing and [Appendix 2] on debt reorganization. (13.14.23)

### Capital taxes (13.14.28 / 13.28)
- Definition: "Capital taxes consist of taxes levied at irregular and infrequent intervals on the values of the assets or net worth owned by institutional units or on the values of assets transferred between institutional units as a result of legacies, gifts inter vivos, or other transfers." (13.14.28 / 13.28)
- Components:
  - (a) Capital levies: taxes on values of assets or net worth levied at irregular, and very infrequent, intervals of time. (13.14.28 / 13.28)
  - (b) Taxes on capital transfers: taxes on the values of assets transferred between institutional units, consisting mainly of inheritance taxes (death duties) and gift taxes, including intra-family gifts made to avoid or minimize inheritance taxes; they do not include taxes on sales of assets. (13.14.28 / 13.28)
- Classification guidance:
  - Recurrent taxes on income and wealth and taxes on financial and capital transactions are classified as current transfers (see paragraphs 12.28–12.31). (13.14.28 / 13.28)
  - Detail on classification is in the Government Finance Statistics Manual 2001. (13.14.28 / 13.28)

### Nonlife insurance claims (13.14.24 / repeated)
- General rule: Nonlife insurance claims are normally classified as current transfers. (13.14.24)
- Exceptional cases: For exceptionally large claims (e.g., following a catastrophe or major disaster at national level), some part of claims may be recorded as capital transfers rather than normal current transfers. (13.14.24)
- Practical convention: To simplify and promote consistency, "all cross-border nonlife insurance claims are classified as current transfers, unless it is necessary to record a capital transfer to be consistent with the national accounts." (13.14.24)
- Reporting advice: To allow comparability with partner data, a supplementary item should be provided for insurance claims included in capital transfers. (13.14.24)
- Cross-reference: For current transfers relating to insurance premiums and claims, see paragraphs 12.41–12.46. (13.14.24)

### Investment grants (13.14.25–13.14.26)
- Definition: "Investment grants consist of capital transfers in cash or in kind made by governments [or international organizations] to other institutional units to finance all or part of the costs of their acquiring fixed assets." Recipients may be other governments or other entities. (13.14.25)
- Recipient obligations: Recipients are obliged to use investment grants received in cash for purposes of gross fixed capital formation; grants are often tied to specific investment projects. (13.14.25)
- Distinction from direct investment:
  - If a foreign government funds an investment project as a direct investor, the amount is classified as equity in a direct investment enterprise. A direct-investment stake is distinguished by ownership of voting power and a right to future benefits (e.g., dividends or sale rights). (13.14.25)
- Payment profile:
  - Investment grants in cash paid in installments for long projects continue to be classified as capital transfers across accounting periods. (13.14.26)
  - Investment grants in kind include transfers of transport equipment, machinery, and provision of buildings or other structures for nonresident units; transfers of military equipment classified as fixed assets are included. (13.14.26)

### One-off guarantees and other debt assumption (13.14.27)
- Capital transfer event: A capital transfer occurs when a one-off guarantee is activated and the guarantor acquires no claim on the debtor or a claim worth less than the value of the guarantee. The same treatment applies where the debt-assuming party is not a guarantor. (13.14.27)
- Direction of transfer:
  - If the original debtor still exists, the capital transfer is from the debt-assuming party (assumer) to the debtor. (13.14.27)
  - If the original debtor no longer exists, the capital transfer is from the debt-assuming party (assumer) to the creditor. (13.14.27)
- Valuation of any claim: The value of any claim the debt-assuming party receives from the debtor (e.g., a promise of reimbursement) is treated as a financial account transaction between the guarantor and the debtor. (13.14.27)
- Additional guidance: Treatment described in more detail in paragraphs [8.42–8.45], including when the guarantor is in a direct investment relationship with the debtor; different types of guarantees distinguished in paragraph [5.68]. (13.14.27)

### Other capital transfers and large nonrecurrent compensations (13.14.27a; 13.14.29–13.14.31, 13.14.33–13.14.35, 14.35a)
- Definition: Other capital transfers are capital transfers other than investment grants, capital taxes, and debt forgiveness. (14.27a)
- Major nonrecurrent compensations: Payments in compensation for extensive damages or serious injuries not covered by insurance that are intended to recover losses over a multi-year period or to replace a nonfinancial or financial asset are included in capital transfers. These payments may be awarded by courts, arbitration, or settled out of court. Examples include compensation for major explosions, oil spillages, side effects of pharmaceutical products, and anti-competitive behavior. If a court-ordered or settled amount is identifiable to a specific unpaid debt, it should be recorded under the relevant financial account item. (13.14.29)
- Assets of persons changing economic territory of residence are other changes in volumes, not imputed as transfers. (13.14.30)
- Large gifts and inheritances: Capital transfers include large gifts and inheritances (legacies), including those to nonprofit institutions, whether under wills or inter vivos; also include exceptionally large donations to finance gross fixed capital formation. Cash grants from donor governments or multilateral financial institutions to debtor economies to be used to repay debt are capital transfers. (13.14.31)
- Capital contributions to international organizations or nonprofit institutions are capital transfers if they do not give rise to equity for the provider. (13.14.32)
- Concessional lending: The chapter notes a transfer element with respect to concessional lending. Where governments or international organizations provide loans with concessional interest rates, no adjustment is made to the recording of the loan or of interest, nor is any transfer recorded in the core external sector statistics; however, "the transfer element of concessional loans can be shown as a capital transfer at inception as supplementary data." (13.14.33)
- Bailouts: If a government buys assets for more than their market value as part of a bailout, the sale and purchase of the asset should be recorded at market value and a capital transfer recorded for the difference between the market price and the total amount paid. (13.14.34)
- Household-to-household capital transfers: These may be identified separately when significant and are included in the supplementary item personal remittances (see [Appendix 5]). (13.14.35)
- Citizenship/passport-for-contribution programs: If nonrefundable economic contributions specifically earmarked for capital investment projects are made to obtain citizenship or passports, they should be recorded as capital transfers; countries may publish a supplementary item within other capital transfers where these contributions are important. (14.35a)

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_Source: https://www.imf.org/-/media/files/data/statistics/bmp7/draft-chapters/bpm7-chapter-14-capital-account.pdf_