## Recording citizenship-by-investment programs

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### SECTION I: THE ISSUE — background and core problem
- There is a lack of clear guidance on how to record citizenship-by-investment (CBI) programs in statistical manuals; compilers face uncertainty whether to treat contributions as taxes, services, or transfers, which have different impacts on key macroeconomic variables.
- The Guidance Note (GN) was prepared by Thomas Elkjaer, David Bailey, Padma Sandhya Hurree Gobin, and Venkat Josyula (all IMF), with discussion contributions from Phillip Stokoe (IMF) and Prunela Charles-Williams (Eastern Caribbean Central Bank).
- Core outstanding question: are nonrefundable CBI contributions taxes (current or capital), purchases of services, or transfers?

### What CBI programs are and how contributions arise
- Definition and features:
  - Citizenship-by-investment, immigrant investor, or economic citizenship programs allow individuals to obtain an additional citizenship, passport, or long-term visa by making economic contributions to another country.
  - CBI programs often have minimal to no residency requirements or look-back rules of past presence in the country.
  - Most programs are designed with the notion to use the contributions to improve the welfare and economic development of the country.
- Four contribution mechanisms:
  - (i) significant purchases of land or property;
  - (ii) business activities (e.g., investments in business assets/job creation schemes);
  - (iii) investments in financial assets such as placing large deposits in resident banks or large purchases of government debt securities;
  - (iv) large, nonrefundable contributions to the government, nominated development funds, or possibly non-profit institutions serving households.
- Prevalence and illustrative macro examples:
  - At least 23 countries have CBI programs and around 11 offer citizenship or long-term visas for large one-off fees.
  - Cited country examples offering large one-off fees include Antigua and Barbuda, Cambodia, Dominica, Grenada, Malta, Moldova, Montenegro, St. Kitts and Nevis, St. Lucia, Thailand, and Vanuatu.
  - St. Kitts & Nevis collected large one-off fees amounting to at least nine percent of GDP in 2015, and five percent of GDP in 2016 in a development fund (St. Kitts & Nevis Sugar Industry Diversification Foundation, 2016).
  - For Portugal, 13 percent of direct investment (DI) inflows in 2014 came from its Golden Visa Program that requires real estate investments (Gold and El-Ashram, 2015).
  - For Vanuatu, CBI programs became a regular source of government income, enabling a government surplus and a stimulus package in response to the COVID-19 crisis (Developblog, 2020).
- Distinction from travel visas:
  - CBI programs provide a “fast track” way to obtain citizenship, usually without taking up residency and often with no or minimal requirements for the recipient to visit the country.
  - Some applicants will take up or already have residency, but many will not.

### Existing statistical guidance and identified gaps
- Refundable contributions:
  - Refundable contribution mechanisms correspond to standard financial-account transactions for which BPM6 provides guidance:
    - purchase of property/land: classify as DI;
    - business activities: classify as financial assets (e.g., DI) or possibly in the capital accounts as acquisitions of nonproduced, nonfinancial assets (e.g., leases or licenses);
    - investments in financial assets: per the classification of financial assets in BPM6, Chapter 5.
- Nonrefundable contributions:
  - Nonrefundable contributions are government revenues, but existing manuals do not provide direct guidance on whether they are taxes, purchases of services, or transfers.
  - Some prior technical assistance recommended treating nonrefundable CBI revenues as taxes based on 2008 SNA (paragraph 8.54), BPM6 (paragraph 12.30), and GFSM 2014 (paragraph 5.81, fourth bullet), which address fees "out of all proportion to the cost of issuance."
  - Tension in manuals:
    - If fees are "out of proportion to the cost of issuance" or require "little work" by government, they are taxes (2008 SNA; GFSM 2014; BPM6).
    - BPM6 (paragraph 10.181) by convention treats amounts payable by household for passports as purchases of services.
  - Additional complication when nonrefundable contributions are paid to entities outside the general government boundary (e.g., national development funds): authority to issue passport or grant citizenship rests with government, which can imply rerouting to general government revenue for GFS despite payments being directed outside general government.

### Classification options discussed in the Guidance Note
- The GN puts forward three main options for nonrefundable contributions:
  - Option 1: Taxes
    - Rationale: "Out of proportion" criterion (2008 SNA paragraph 8.54; GFSM 2014 paragraphs 5.81 fourth bullet and 5.138; BPM6 paragraph 12.30); payments that require little government work and are automatically granted could be viewed as a device to raise taxes (BPM6, paragraph 10.181).
    - Classification implications:
      - Could be treated as taxes, likely akin to capital taxes given irregular or once-off nature (BPM6, paragraph 13.28), though not a complete analog because citizenship is not an asset nor transferable.
      - If recurrent, could be considered current taxes under secondary income.
    - Premise: non-residents can voluntarily enter into a tax obligation.
  - Option 2: Services
    - Rationale: From purchaser’s viewpoint, payments compensate for obtaining citizenship; non-resident non-citizens exercise meaningful choice and can "shop around."
    - Classification implications: revenues recorded in the current account as payments for services.
  - Option 3: Transfers, other than taxes
    - Option 3a (unpartitioned): treat as transfers other than taxes (current or capital depending on use).
      - Rationale: unrequited payments much larger than passport value; could be similar to "exceptional large donations" and recorded as capital transfers if used for capital projects.
      - Caveat: if programs are routine revenue generators, they may not be exceptional and could be current transfers.
    - Option 3b (partitioning): split payment into a small service component reflecting administrative cost and a remainder as transfer.
      - Rationale: recognizes costs of running the program; avoids recording full revenue as sales of services.
      - Practical concern: the service component would be small relative to the transfer, making partitioning impractical in many cases.

### Analytical implications and impacts on headline macro variables
- The options imply markedly different interpretations of headline numbers for economies with important CBI receipts:
  - Option 1 (tax): increases tax revenues and could lead to interpretation of high tax-to-GDP burden or effective tax collection.
  - Option 2 (service): increases the current account through service receipts and could imply improved external competitiveness.
  - Option 3 (capital transfer): improves the capital account, which is often viewed as more volatile and harder to interpret.
- Selected results from GN Table 1 (impacts relative to baseline where contribution is excluded):
  - Government Finance Statistics
    - Total revenue: increase under Taxes, Services, Transfers (both Current and Capital treatments).
    - Tax burden: increase under Taxes and Services; unchanged under Transfers.
    - Gross/net operating balance: increase under Taxes, Services, and Transfers.
    - Overall fiscal balance: increase under all treatments.
  - National Accounts
    - GDP (Gross Domestic Product): increase if treated as Taxes; unchanged under Services and Transfers in the presented table.
    - Gross saving: increase under Taxes; other distinctions per table.
  - Balance of Payments
    - Current account balance: increase under Taxes and Services; unchanged under Capital Transfers.
    - Capital account balance: increase under Transfers (Capital) and under Taxes if treated as capital taxes; unchanged under Services.
- Recommendation for reporting practice: countries for which CBI are important can publish a line “of which” to disclose CBI amounts, recognizing CBI will not be a standard component.

### Consultations, votes, and community views
- Balance of Payment Task Team (BPTT) consultation:
  - Members divided between Option 1 (taxes) and Option 3 (transfers); less support for Option 2 (services).
  - Support for Option 1 premised on payments being compulsory; support for Option 3 premised on payments being unrequited and not compulsory.
- Public consultation:
  - General consensus for providing explicit guidance in the update of the manuals.
  - Slight majority supported guidance by convention to allow uniform treatment.
  - Slight majority favored Option 1 (taxes) over Option 3a (transfers), largely tied to views on whether payments are compulsory.
  - Common view: whether taxes or transfers, payments were generally viewed as current rather than capital.
- IMF Committee on Balance of Payments Statistics (JUNE 2021):
  - Members preferred Options 1 and 3a with split views between both.
  - Agreement that a typology of existing programs would help compilers; many favored adoption of a convention for consistency.
  - Supported consulting national accounts (AEG) and Government Finance Statistics (GFSAC) communities before final decision.
- Government Finance Statistics (GFS) community consultation:
  - Slight majority favored recording as taxes, but views varied; countries with CBI schemes involving large nonrefundable payments favored treating it as non-tax revenue.
- Advisory Expert Group (AEG) on National Accounts consultation:
  - Preferred recording CBI nonrefundable contributions to government as current or capital transfers, while noting some programs could justify tax recording.
  - Suggested using 2008 SNA principles (paragraphs 8.38–40) to distinguish current vs capital.
- IMF internal users (May 2022) consultation:
  - Unanimous agreement that clear guidance was important.
  - Unanimous view that recording nonrefundable contributions as taxes was not appropriate.
  - No consensus on which non-tax revenue type to use; view that “one size fits all” may not be appropriate and case-by-case assessment is needed based on program details.
  - Macro-criticality noted: annual CBI revenues in some Caribbean countries could amount to as much as 20 percent of GDP (as in St. Kitts), with smaller but still significant amounts in Grenada, Antigua, and Dominica.
  - Policy concerns if recorded as taxes: potential skewing of tax capacity analysis and misguiding tax reform timing, increasing public finance vulnerability.

### Rejected options and practical compilation considerations
- Option 2 (services) was mostly rejected in consultations; the “shop around” purchaser- choice argument was considered weak by many respondents.
- Option 3b (partitioning into service and transfer) seen as less attractive on compilation grounds:
  - Service (administrative-cost) component would be small relative to the transfer.
  - Complexity and weak administrative-cost basis make partitioning impractical in many cases.
- Minority views: some GFS and Fund Departments argued the value of citizenship may extend beyond administrative costs, supporting service treatment in isolated cases.

### Guidance Note recommendations and decision rules
- Primary GN recommendation:
  - Treat nonrefundable contributions to government (or their nominated agency) under CBI programs as non-tax revenue (transfers not elsewhere classified) in macroeconomic statistics.
  - Rationale:
    - Reflects current approach of countries with relevant CBI programs.
    - Addresses IMF users’ concerns about interpretation of macroeconomic statistics related to CBI programs.
    - Recognizes the non-compulsory nature of the transaction (households can gain citizenship by other means such as residence).
    - Recognizes that nonrefundable contributions are significantly greater than immediate administrative costs of managing the scheme and providing the citizenship/passport.
- Choice of transfer type:
  - Given variation in program operationalization, whether a transfer is current or capital should be determined based on specific program characteristics and statistical principles in the manuals.
- Decision-tree highlights (Annex I):
  - If receipt from nonresident is an investment in land/real estate, classify as Direct Investment (or other appropriate investment classification).
  - If receipt is a nonrefundable contribution to government or a government agency:
    - Classify as a capital transfer if specifically earmarked for capital investment projects.
    - Otherwise classify as an other current transfer.
  - If payments can be separated into capital and non-capital elements, partition between capital transfers and other current transfers is permitted.
  - Examples and classification rules provided for equity, debt securities, deposits, and resident branch/notional unit treatment.

### BPM6/manual updates and coordination needs
- Chapters/paragraphs identified for possible updates to BPM6 (Annex V) to reflect CBI guidance include:
  - BPM6, Chapter 4, section E: “Residence”
  - BPM6, Chapter 9, section B: “Other Changes in the Volume of Financial Assets and Liabilities” paragraph 9.22
  - BPM6, Chapter 10, Section C: “Service” paragraph 10.180–181
  - BPM6, Chapter 12, section C: “Current Transfer” paragraph 12.30
  - BPM6, Chapter 13, Section C: “Capital Transfer”, paragraph 13.19–13.35
- Prevailing treatment will impact Government Finance Statistics and national accounts; coordination across BPM, 2008 SNA, and GFSM 2014 communities is recommended to ensure consistency.

*Source: International Monetary Fund — Guidance Note and consultations (JUNE 2021; May 2022).*

### SECTION I: THE ISSUE

### SECTION I: THE ISSUE

### Background
- There is a lack of clear guidance on how to record citizenship-by-investment (CBI) programs in statistical manuals; compilers face uncertainty whether to treat contributions as taxes, services, or transfers, which have different impacts on key macroeconomic variables.
- The note was prepared by Thomas Elkjaer, David Bailey, Padma Sandhya Hurree Gobin, and Venkat Josyula (all IMF), with discussion contributions from Phillip Stokoe (IMF) and Prunela Charles-Williams (Eastern Caribbean Central Bank).

### What are CBI programs
- Citizenship-by-investment, immigrant investor, or economic citizenship programs allow individuals to obtain an additional citizenship, passport, or long-term visa by making economic contributions to another country.
- CBI programs often have minimal to no residency requirements or look-back rules of past presence in the country.
- Most programs are designed with the notion to use the contributions to improve the welfare and economic development of the country.

### Contribution mechanisms of CBI programs
- The four contribution mechanisms are:
  - (i) significant purchases of land or property;
  - (ii) business activities (e.g., investments in business assets/job creation schemes);
  - (iii) investments in financial assets such as placing large deposits in resident banks or large purchases of government debt securities;
  - (iv) large, nonrefundable contributions to the government, nominated development funds, or possibly non-profit institutions serving households.

### Prevalence and macroeconomic examples
- CBI programs are widespread: at least 23 countries have CBI programs and around 11 offer citizenship or long-term visas for large one-off fees; cited examples of countries offering large one-off fees include Antigua and Barbuda, Cambodia, Dominica, Grenada, Malta, Moldova, Montenegro, St. Kitts and Nevis, St. Lucia, Thailand, and Vanuatu.
- Country-specific macro impacts cited:
  - St. Kitts & Nevis collected large one-off fees amounting to at least nine percent of GDP in 2015, and five percent of GDP in 2016 in a development fund (St. Kitts & Nevis Sugar Industry Diversification Foundation, 2016).
  - For Portugal, 13 percent of direct investment (DI) inflows in 2014 came from its Golden Visa Program that requires real estate investments (Gold and El-Ashram, 2015).
  - For Vanuatu, CBI programs became a regular source of government income, enabling a government surplus and a stimulus package in response to the COVID-19 crisis (Developblog, 2020).

### Distinction from travel visas
- CBI programs differ from travel visas: travel visas grant permission to travel and usually require the appropriate visa before travel; CBI programs provide a “fast track” way to obtain citizenship, usually without taking up residency and often with no or minimal requirements for the recipient to visit the country.
- Some applicants will take up or already have residency, but many will not.

### Current statistical treatment and clarity
- Refundable contribution mechanisms correspond to standard financial-account transactions for which BPM6 provides guidance:
  - purchase of property/land: classify as DI;
  - business activities: classify as financial assets (e.g., DI) or possibly in the capital accounts as acquisitions of nonproduced, nonfinancial assets (e.g., leases or licenses);
  - investments in financial assets: per the classification of financial assets in BPM6, Chapter 5.
- Nonrefundable contributions are government revenues, but existing manuals do not provide direct guidance on whether they are taxes, purchases of services, or transfers.
- Recent IMF technical assistance to one country recommended treating nonrefundable CBI revenues as taxes, based on guidance in 2008 SNA (paragraph 8.54), BPM6 (paragraph 12.30), and GFSM 2014 (paragraph 5.81, fourth bullet), which address fees "out of all proportion to the cost of issuance."
  - Recommendation: record revenues (i) in the balance of payments as taxes in the secondary distribution of income account—as other current taxes; and (ii) in government finance as other taxes on use of goods and on permission to use goods or perform activities.

### Main shortcomings of current manuals and compilation complications
- Manuals lack guidance directly addressing unique characteristics of CBI programs: substantial large individual nonrefundable contributions paid by households.
- Apparent tension in guidance:
  - If fees are "out of proportion to the cost of issuance" or require "little work" by government (BPM6; 2008 SNA; GFSM 2014), they are taxes.
  - BPM6 (paragraph 10.181) by convention treats amounts payable by household for passports as purchases of services.
- Additional complication when nonrefundable contributions are paid to entities outside the boundary of general government (e.g., national development funds or entities classified outside general government):
  - Authority to issue passport or grant citizenship rests with government; payments directed to an external entity by government dictate may be tantamount to general government revenue routed through government accounts.
  - Standard practice for GFS: reroute payment as transactions between the central government and the individual nonresident and through government accounts to the ultimate receiving domestic entity; compilation challenges arise with extrabudgetary transactions where data may be unavailable.
- The subsequent discussion assumes nonrefundable contributions are recorded within the central government for external account statistics purposes.

### Issues for discussion: how to treat nonrefundable contributions
- Outstanding question: are nonrefundable contributions taxes (and if so, current or capital taxes?), sales of services, or transfers?
- Three main options are discussed:

  - Option 1: Taxes
    - Rationale:
      - "Out of proportion" criterion (2008 SNA paragraph 8.54; GFSM 2014 paragraphs 5.81 fourth bullet and 5.138; BPM6 paragraph 12.30) tests payment of fees against cost of issuance; fees “out of all proportion to the cost of issuance” are considered taxes.
      - If little work by government is involved and issuance is granted automatically on payment, payments are “simply a device to raise taxes” (BPM6, paragraph 10.181).
    - Classification implications:
      - Contributions could be treated as taxes, likely akin to capital taxes given their irregular, infrequent, or once-off nature (BPM6, paragraph 13.28), though not a complete analog because citizenship is not an asset nor transferable.
      - If recurrent, contributions could be considered current taxes under the secondary income account.
    - Premise: non-residents can voluntarily enter into a tax obligation.

  - Option 2: Services
    - Rationale:
      - From the purchaser’s viewpoint, contributions can be neither compulsory nor unrequited; non-resident non-citizens exercise meaningful choice and can "shop around."
      - By analogy to standard fees for passport issuance, these transactions could be treated as purchases of services.
    - Classification implications:
      - Revenues would be recorded in the current account as payments for services.

  - Option 3a: Transfers, other than taxes
    - Rationale:
      - If contributions are unrequited and much larger than the value of the passport, they could be transfers.
      - Given program objectives to improve welfare and economic development, contributions could be similar to GFSM 2014 (paragraph 5.148, sixth bullet) "exceptional large donations" as capital transfers.
    - Caveat:
      - If CBI programs are common policy and revenue generators, they may not be exceptional and could be seen as current transfers instead of capital transfers.

  - Option 3b: Partitioning between transfers and services
    - Rationale:
      - Recognizes some costs associated with running the program.
      - Split the nonrefundable contribution into a small service component reflecting the cost of processing applications and issuing the passport, with the remainder recorded as transfers.
    - Advantage:
      - Avoids recording the full revenue as sales of services and captures the hybrid nature of the transaction.

- Annex II (referenced) summarizes arguments for and against each option.

### Analytical and user-need considerations; impacts on headline macro variables
- The options have markedly different analytical interpretations of key macroeconomic headline numbers for countries where CBIs are important:
  - For option 1 (tax): increase tax revenues, which may lead to interpretation of high tax-to-GDP burden or effective tax collection.
  - For option 2 (service): a positive effect on the current account through the service component, which may lead to interpretation of improved external competitiveness.
  - For option 3 (capital transfer): classification would improve the capital account, which is often viewed as more volatile and difficult to interpret.
- Recommendation for reporting practice: although CBI will not be a standard component, countries for which CBI are important can publish a line “of which”.

### Fiscal and external-statistics implications
- Main fiscal impact hinges on whether revenue is considered tax or non-tax revenue, affecting assessments of tax burden and wider economy; tax vs non-tax distinction can be politically sensitive, especially in low income and corporation tax rate countries offering CBI schemes.
- For external sector statistics: whether the transaction is treated as current or capital matters—current treatment affects the current account balance (an important indicator of external sustainability); capital treatment impacts the capital account, with arguably less impact on economic analysis.

### Table 1 — impacts of different treatments on key macroeconomic statistics (summary of indicators)
- The table indicates how a particular indicator will be impacted (increase, decrease or be unchanged) pursuant to the treatment for nonrefundable contributions, against a baseline where the contribution is not included in the macroeconomic statistics.
- Selected results from Table 1 (for countries with CBI programs):
  - Government Finance Statistics
    - Total revenue: increase under Taxes, Services, Transfers (both Current and Capital treatments).
    - Tax burden: increase under Taxes and Services; unchanged under Transfers.
    - Gross/net operating balance: increase under Taxes, Services, and Transfers.
    - Overall fiscal balance: increase under all treatments.
  - National Accounts
    - GDP (Gross Domestic Product): increase if treated as Taxes (with the understanding that the taxes would be included under current taxes on income, wealth, etc. and not as taxes on production); unchanged under Services and Transfers in the presented table.
    - Gross saving: increase under Taxes; unchanged or increase under other treatments per table distinctions.
  - Balance of Payments
    - Current account balance: increase under Taxes and Services; unchanged under Capital Transfers.
    - Capital account balance: increase under Transfers (Capital) and under Taxes if treated as capital taxes; unchanged under Services.

### Conclusion and proposal
- It is proposed to reflect explicit guidance on the recording of CBI programs.
- For CBI programs that entail nonrefundable contributions, further guidance is needed.
- For CBI programs that entail refundable contributions, which are in the form of a financial investment, the current guidance of financial investment in BPM6 is sufficient.

*Source: International Monetary Fund — SECTION I: THE ISSUE.*

### 21.      The Guidance Note (GN) puts forward three options to classify those nonrefundable

### b8-recording-citizenbyinvestment-programs - 21.      The Guidance Note (GN) puts forward three options to classify those nonrefundable

### Classification options for nonrefundable CBI contributions
- Option 1: Record as taxes under secondary income (viewpoint of the country offering a CBI program).
- Option 2: Treat as purchase of services (viewpoint of the person acquiring a CBI).
- Option 3: Consider as transfers other than taxes.
  - Option 3a: Transfers other than taxes (unpartitioned).
  - Option 3b: Partition between transfers other than taxes and services (service component and transfer component).
- Annex V identifies BPM sections that need adjustment to reflect guidance.

### Balance of Payment Task Team (BP TT) and public consultation findings
- BPTT consultation:
  - Members were divided between Option 1 (taxes) and Option 3 (transfers).
  - Less support for Option 2 (services).
  - Support for Option 1 premised on payments being compulsory; then treatment as taxes.
  - Support for Option 3 premised on payments being unrequited and not compulsory.
- Public consultation:
  - General consensus for providing explicit guidance in the update of the manuals.
  - Slight majority supported guidance by convention to allow uniform treatment across economies.
  - Slight majority in favor of Option 1 (taxes) over Option 3a (transfers, other than taxes), largely tied to whether respondents considered payments compulsory or voluntary.
- Common view across consultations:
  - Whether recorded as taxes or transfers, payments were generally viewed as current (instead of capital) payments.
  - No counterpart (e.g., ownership rights on real or financial assets) was identified for most nonrefundable contributions.
  - Importance emphasized of comprehensive guidance on all types of CBI programs and consistent treatment with Government Finance Statistics and national accounts.

### IMF Committee on Balance of Payments Statistics (JUNE 2021) and inter-agency coordination
- Committee members:
  - Expressed preference for Options 1 and 3a with split views between both.
  - Agreed that including a typology describing different existing programs in the Compilation Guide may help compilers.
  - Many members favored adoption of a convention to ensure consistent treatment and cross-country comparability.
- Committee members supported consulting the national accounts community (AEG) and the Government Finance Statistics community (GFSAC) before a final decision to ensure coordination across statistical domains.

### Government Finance Statistics (GFS) community consultation
- Slight majority favored recording nonrefundable contributions as taxes, but significant diversity of views prevented a firm conclusion.
- All respondents from countries with CBI schemes involving large nonrefundable payments to government favored treating it as non-tax revenue (with differences in type of non-tax revenue).
- Little consensus on which specific type of tax (if tax treatment) or which type of transfer (if transfer treatment) should apply.

### Advisory Expert Group (AEG) on National Accounts consultation
- The AEG preferred recording CBI nonrefundable contributions to government as current or capital transfers.
- Noted CBI programs differ and in some instances a tax recording may be justified.
- Suggested distinguishing nonrefundable CBI contributions as current or capital based on general SNA principles (2008 SNA paragraphs 8.38–40).

### IMF internal users (May 2022) consultation
- Unanimous agreement that clear guidance was important.
- Unanimous view that recording nonrefundable contributions as taxes was not appropriate.
- No consensus on which non-tax revenue type to use (current/capital transfer or services).
- Conclusion: “One size fits all” may not be appropriate; contributions could be recorded as whichever type of non-tax revenue is most appropriate depending on program details and intended uses of contributions.
- Noted macro-criticality: annual CBI revenues in some Caribbean countries could amount to as much as 20 percent of GDP (as in the case of St. Kitts), with smaller but still significant amounts in Grenada, Antigua, and Dominica.
- Policy concerns if recorded as taxes:
  - Potential skewing of analysis of tax revenue potential and capacity.
  - Risk of providing a wrong signal about need to increase tax system efficiency, potentially delaying needed tax reforms and increasing public finance vulnerability to external shocks.

### Rejected options and practical considerations
- Option 2 (purchase of services) was mostly rejected.
  - Argument that nonresident non-citizens “shop around” was viewed as weak.
- Option 3b (partitioning between a service component and transfer) was generally less attractive on practical compilation grounds:
  - The service component (based on administrative costs) would be small and insignificant compared to the transfer component.
  - Complexity and minimal administrative-cost basis made partitioning impractical.
- Minority support for Option 2 existed in some GFS and Fund Departments consultations, arguing that the value of citizenship may extend beyond administrative costs.

### Recommendations of the Guidance Note (GN)
- The GN recommends treating nonrefundable contributions to government (or their nominated agency) under CBI programs as non-tax revenue (transfers not elsewhere classified) in macroeconomic statistics.
  - Rationale:
    - Reflects current approach of countries with relevant CBI programs.
    - Addresses IMF users’ concerns about the interpretation of macroeconomic statistics related to CBI programs.
    - Recognizes the non-compulsory nature of the transaction (households can gain citizenship by other means such as residence).
    - Recognizes that nonrefundable contributions are significantly greater than immediate administrative costs of managing the scheme and providing the citizenship/passport.
- Given variation in operationalization of CBI programs, the choice of transfer (current or capital) should be based on the specific nature of the program following statistical principles from the manuals.
- Annex I: A schematic decision tree is provided to help compilers classify payments under CBI programs.

### Decision tree and classification guidance highlights (Annex I)
- If CBI-related receipt from nonresident is an investment in land/real estate, classify as Direct Investment (or other appropriate investment classification).
- If receipt is a nonrefundable contribution to government or a government agency:
  - Classify as a capital transfer if specifically earmarked for capital investment projects.
  - Otherwise classify as an other current transfer.
- If payments can be separated into capital and non-capital elements, partition between capital transfers and other current transfers is permitted.
- Examples and investment classification rules are provided for equity, debt securities, deposits, and resident branch/notional unit treatment.

### Annexed arguments and conceptual points (Annex II and Annex III)
- Option 1 (taxes) arguments:
  - Payments may be out of proportion to cost; if citizenship is automatically granted on payment with little work, payments may effectively be a device to raise taxes.
  - Types of tax considered: either capital taxes (infrequent/one-off) or current taxes, though neither may neatly match nonrefundable CBI payments.
- Option 2 (services) arguments:
  - From purchaser viewpoint, payments compensate for obtaining something of value; non-residents exercise meaningful choice in acquiring citizenship.
  - Difficult to measure the value of citizenship, including indirect benefits.
- Option 3 (transfers) arguments:
  - Payments are non-compulsory and unrequited (participants gain something of value), consistent with transfer recording.
  - Transfers could be capital (exceptionally large donations) if used to finance capital investment, or other current transfers if they are ongoing public revenue.
- IMF Departments’ summary:
  - Contributions are macro-critical in some economies (example: as much as 20 percent of GDP).
  - Unanimous agreement that tax recording is inappropriate.
  - No consensus on a single non-tax revenue classification; recommended case-by-case assessment based on program details and intended uses.

### BPM manual updates and coordination (Annex V)
- Chapters and paragraphs identified for possible updates to BPM6 to reflect CBI guidance:
  - BPM6, Chapter 4, section E: “Residence”: include mention of CBI programs.
  - BPM6, Chapter 9, section B: “Other Changes in the Volume of Financial Assets and Liabilities” paragraph 9.22: discuss timing of change in residency if applicable.
  - BPM6, Chapter 10, Section C: “Service” paragraph 10.180–181: consider CBI in relevant convention if applicable.
  - BPM6, Chapter 12, section C: “Current Transfer” paragraph 12.30: include guidance on recording CBI as relevant.
  - BPM6, Chapter 13, Section C: “Capital Transfer”, paragraph 13.19–13.35: include guidance on recording CBI as relevant.
- Prevailing treatment will impact government finance statistics and national accounts; coordination is needed to ensure consistency.

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_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/b8-recording-citizenbyinvestment-programs.pdf_