## BPM7 Chapter 12. Primary Income Account: Annotated Outline ## Source details **Canonical URL:** [BPM7 Chapter 12. Primary Income Account: Annotated Outline](https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-12-primary-income-account-annotated-outline.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-12-primary-income-account-annotated-outline.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-12-primary-income-account-annotated-outline.pdf.json) --- ### Overview of the Primary Income Account - The chapter introduces primary income and its main components, describes links to gross domestic product (GDP) and gross national income (GNI), and distinguishes primary income from secondary income. - The structure of the section is maintained from BPM6 Chapter 11. - Note: The term “primary income” is used throughout the annotated outline; pending outcomes of CM.2, Terminology and Branding of the Economic Accounting Statistical Standards, and related work to develop a standard glossary for macroeconomic accounts, the term may be changed. The current proposal under review is to replace “primary income” with “earned income.” ### Changes and Updates from BPM6 (general) - The structure and major components from BPM6 are retained, with targeted updates to improve consistency with other macroeconomic statistics manuals (e.g., System of National Accounts 2025). - Updates reflect Guidance Notes (GNs) and Clarification Notes; specific GNs referenced throughout the chapter include: GNs B.9, B.12, D.7, D.16*, D.17*, C.2, F.2*, F.3, G.9, IF.1, DZ.6, WS.6*, WS.7*, WS.8*, WS.11*, WS.14*, and AI.2. - The Clarification Note on The Statistical Treatment of Negative Interest Rates (CN.3) is incorporated where relevant. ### Types of Primary Income — Coverage, Timing, Valuation (Section II) - The section retains BPM6 coverage but adds important clarifications and new paragraphs/boxes in response to specific Guidance Notes and Clarification Notes. A. Compensation of Employees - No significant changes. B. Dividends and Withdrawals of Quasi-Corporations - Paragraph 11.27 on exceptional payments will be revised per GN D.17 and related Issue Note: - The concept of “superdividends” for foreign direct investment is recommended to be discarded. - Any distributions of accumulated reserves from ordinary earnings will be treated as dividends. - Exceptional payments by corporations to shareholders made from sales of assets will continue to be excluded from dividends. - It will remain permissible, where feasible, to separately identify payments from accumulated reserves as a supplementary item for comparability with domestic superdividends. - Corresponding changes will be made to paragraph 11.30 on liquidating dividends. C. Reinvested Earnings - Pending final outcomes of GN D.16, clarifications will be made to the definition of retained earnings (paragraph 11.34) and to the discussion of reinvested earnings on direct investment enterprise (paragraphs 11.40–47). - Box 11.1 (Reinvested Earnings with Chain of Ownership) will be updated to reflect clarifications suggested in D.16. - Regarding fines and penalties and their impact on direct investment income (GN C.8): - Because no agreement was reached, the chapter will recommend compilers base determinations about whether fines/penalties are included in the Current Operating Performance Concept (COPC) on the specific characteristics of the fine/penalty, including whether it is considered extraordinary. - Per GN F.2, a new paragraph will encourage supplemental reporting of retained earnings for portfolio investment and signal possible future expansion of retained earnings treatment to portfolio investment. D. Interest and Similar Returns - Per GN IF.1 on Islamic Finance: - The term “interest” will be replaced with “interest and similar returns” to include broader interest-like returns on Islamic instruments. - The definition of interest will be updated accordingly. - Economies with significant Islamic financial activities will be encouraged to create a sub-category within interest and similar returns to present investment income for Islamic deposits, loans, and debt securities separately. - The section may refer readers to Chapter 26 of 2025 SNA on Islamic Finance for more detail. - Per CN.3 on negative interest rates: - A paragraph will clarify that negative interest rates should be recorded as negative income receivable by investors (and payable by financial institutions). - Economies with significant negative-yielding deposits could consider an “of which” category showing negative interest income separately in national publications. - Per GN F.3 on reverse transactions: - Where a reverse transaction covers the period when dividends/interest are payable for an on-sold security (manufactured dividends/interest), the recommendation is to record positive credit in dividends/interest for the security lender and negative credit in dividends/interest for the security borrower (as shown in F.3, Annex II). - Numerical examples will be expanded to include bonds issued at par, at discount, and at premium, drawing in part from the Handbook on Securities Statistics (Annex 1). E. Investment Income Attributable to Policyholders in Insurance, Standardized Guarantees, and Pension Funds - Clarifications on pension scheme treatment since the 2008 SNA (SNA News & Notes 39/40, AEG 9/2014) will be reviewed to determine needed changes/alignments in BPM. F. Rent - Pending discussions in GN DZ.6 (recording of data), AI.2 (treatment of rent), and GN WS.14 (borderline between taxes, service fees, and other revenue), there may be changes to the definition and recording of rent in the macroeconomic accounts. - Discussions on economic ownership and depletion of natural resources (GN WS.6), accounting for biological resources (GN WS.8), and treatment of renewable energy resources (GN WS.11) may have implications for guidance on rent. G. Taxes and Subsidies on Products and Production - Pending GN WS.7 outcomes, a new section may describe transactions for taxes on production related to emission permit trading schemes, noting cross-border transactions and the possibility of tax revenue being received in one economy for production activities occurring in another economy. - Pending GN WS.14 outcomes, discussion of the borderline between taxes and service fees may be expanded and aligned across manuals. ### Investment Income and Functional Categories (Section III) - Section III explains classification of investment income by functional category and retains BPM6 structure with important changes. - Table 11.2 will be updated to reflect a new detailed breakdown of direct investment income following GN D.7: - The GN recommends de-emphasizing breakdown by investment relationship (direct investor in direct investment enterprise; direct investment enterprises in direct investor (reverse investment); and between fellow enterprises) in favor of sectoral breakdown. - The sectoral breakdown of direct investment income will be included within the standard components of the balance of payments. - The section will recommend supplemental disaggregation of investment income by characteristics of the trading enterprise (ownership and size) as recommended in GN C.2, to highlight the role of enterprises with different characteristics in the current account. - This supplemental presentation will also be described further in Chapter 15, Globalization. ### Schematic Overview (structure and illustrative items) - I Overview of Primary Income Account - Definition - Links to GDP and GNI - Distinguishing primary income from secondary income - Structure of primary income account - Table 12.1 Overview of the Primary Income Account - II Types of Primary Income - A. Compensation of employees - B. Dividends and withdrawals from quasi-corporations - C. Reinvested earnings - Box 12.1 Reinvested Earnings with Chain of Ownership - D. Interest and similar returns - Box 12.2 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Par - Box 12.3 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Discount - Box 12.4 Numerical Example of Calculation of Interest Accrual on a Fixed Interest Rate Bond Issued at Premium - Box 12.5 Numerical Example of Calculation of Interest Accrual on a Zero-Coupon Bond - Box 12.6 Numerical Example of Calculation of Interest Accrual on an Index-Linked Bond—Broad-Based Index - Box 12.7 Numerical Example of Calculation of Interest Accrual on an Index-Linked Bond—Narrowly Based Index - E. Investment income attributable to policyholders in insurance, standardized guarantees, and pension funds - F. Rent - G. Taxes and subsidies on products and production - III Investment Income and Functional Categories - Direct investment income - Box 12.5 Numerical Example of Calculation of Reinvested Earnings of a Direct Investment Enterprise - Table 12.2 Detailed Breakdown of Direct Investment Income updated to reflect sectoral breakdown in favor of investment relationship - Portfolio investment income - Other investment income - Table 12.3 Detailed Breakdown of Other Investment Income - Income on reserve assets - Supplemental presentation of investment income by enterprise characteristics ### References, Numerical Examples, and Cross-Manual Alignment - References and guidance informing updates include: - Guidance Notes: GNs B.9, B.12, D.7, D.16*, D.17*, C.2, F.2*, F.3, G.9, IF.1, DZ.6, WS.6*, WS.7*, WS.8*, WS.11*, WS.14*, and AI.2. - Clarification Note: CN.3 (The Statistical Treatment of Negative Interest Rates). - SNA News & Notes 39/40 and AEG 9/2014 (pension scheme flows and holding gains/losses). - Handbook on Securities Statistics (source of numerical examples). - Guidance notes marked with an asterisk (*) were under consultation at the time of drafting the annotated outline. ### Key Stakeholders Consulted - System of National Accounts and Balance of Payments Manual editors. - IMF Statistics Department Financial Institutions Division and Government Finance Division. --- _Source: https://www.imf.org/-/media/files/data/statistics/bmp7/final-annotated-outlines/bpm7-chapter-12-primary-income-account-annotated-outline.pdf_