## g2-treatment-of-mne-and-intramne-flows

## Source details

**Canonical URL:** [g2-treatment-of-mne-and-intramne-flows](https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/g2-treatment-of-mne-and-intramne-flows.pdf)

## Other formats

- [Markdown version](/-/media/files/data/statistics/bpm6/approved-guidance-notes/g2-treatment-of-mne-and-intramne-flows.pdf.md)
- [Structured JSON version](/-/media/files/data/statistics/bpm6/approved-guidance-notes/g2-treatment-of-mne-and-intramne-flows.pdf.json)

---

### Background and role of MNEs
- Multinational enterprises (MNEs) manage production, trade, direct investment, and international transfer of knowledge and technology to maximize global profits.
- MNEs organize global production among affiliates across economies to leverage lower labor costs, friendlier regulatory environments, more educated workforces, market access, and tax advantages.
- Increasingly, MNEs establish special purpose entities (SPEs) to channel financial investments globally and increase access to multiple financial markets.
- The global consultation was held during June 21 to August 4, 2021: Fifty-five economies participated and submitted 59 complete responses.
- Drafting and supervision: prepared by Ms. Francien Berry (primary drafter, IMF), Ms. Padma Hurree-Gobin, and Ms. Jennifer Ribarsky (GZTT Secretariat, IMF) under the supervision of Messrs. Michael Connolly and Branko Vitas (co-Chairs of the GZTT).

### Measurement challenges posed by MNE and intra‑MNE flows
- Residence and economic presence concepts are central to macroeconomic statistics but less important to MNEs, complicating breakdown of production by economy.
- Current methodological standards treat foreign affiliates of MNEs as resident in their economies of operation to place production where it occurs for GDP estimation.
- Transfer pricing on intra‑group flows and failure to record intra‑group use of intellectual property products may misallocate GDP between parent and affiliate economies.
- Estimates recorded by MNEs in national statistical surveys may not be best suited for national accounts (NAs) and balance of payments purposes.

### Significance and macroeconomic implications
- Extent of measurement issues is not easily quantified, but significant given growing size and importance of MNE activities.
- Mis-measurement can adversely affect key macroeconomic indicators.
- Impacts on GDP arise from misallocation between international trade in goods and services, income, and depreciation charges associated with movable corporate assets, especially intangible assets.
- Without robust accounting for MNE group activities, the reliability of NAs estimates for domestic policymaking may be challenged.

### Options considered by the Globalization Task Team (GZTT)
- Four options discussed to highlight MNE activities in the NAs:
  - Option 1: Emphasize existing indicators within the SNA (no change to core framework).
  - Option 2: Increase granularity and scope of supplementary data within the SNA using institutional sector accounts (ISAs).
  - Option 3: Provide more granularity within the SNA using extended supply and use tables (eSUTs).
  - Option 4: Extend beyond the core SNA framework by developing additional indicators (redefining existing indicators).
- Option 1 specifics:
  - Emphasize indicators—GNI, GNDI, NNI, and NNDI—which generally are less distorted by globalization and less sensitive to MNE impact than GDP.
- Option 2 specifics:
  - Break down financial and nonfinancial corporations’ sectors to show foreign‑controlled corporations and domestic corporations that are part of MNEs, leveraging the G20 DGI-2 sectoral accounts template and the definition of control in BPM6 and OECD BD4.
- Option 3 specifics:
  - Use eSUTs to break industries into enterprises operating domestically, enterprises controlled by domestic MNEs, and foreign controlled affiliates of foreign MNEs for industry and product flow analysis.
- Option 4 example:
  - Consider redefining existing indicators within the SNA framework, exemplified by the GNI* (modified GNI) measure developed by the Irish Economic Statistics Review Group (ESRG).

### Consultation feedback and comparative assessment of options
- Where GDP is severely impacted by globalization, net indicators—NDP, GNI, GNDI, NNI, and NNDI—facilitate in‑depth analysis of MNE impacts.
- Option 1 advantages: international comparability and limited need for significant adjustments by compilers.
- Majority of respondents supported putting more emphasis on net measures; some GZTT members preferred gross measures.
- Compiling internationally comparable measures of consumption of fixed capital (CFC) is challenging; gross measures are more readily available and comparable than net measures.
- Option 2 received majority support in the global consultation: ISAs provide coherent granularity across accounts to distinguish domestic firm–driven activity from foreign MNE–driven activity.
- Option 3 (eSUTs) seen as conceptually viable but too ambitious and resource intensive for consistent implementation across countries: around one‑third of respondents supported eSUTs; about 45 percent supported a compromise to break down GVA by relevant industries according to domestic MNEs versus foreign controlled affiliates.

### Recommended conceptual approach (GZTT)
- Encourage use of additional key gross and net indicators within the NAs to better highlight MNE activities.
- Reinforce ISA supplementary presentation supported by the existing SNA framework, recommending:
  - Separately identifying domestic MNEs.
  - Identifying an aggregate foreign-controlled nonfinancial/financial corporations’ category.
  - Using the foreign/domestic split to help policymakers distinguish between domestic firm–driven activity and foreign MNE–driven activity.
- Recognize need for clearer statistical definition of MNEs and a clear distinction between the MNE and the MNE group to enable macroeconomic statistics reflecting scale and scope of MNE group activities.

### Definition of control and statistical definition of MNE
- Control: ability of one enterprise to exercise the voting power associated with their shareholdings to affect strategic management decisions of another enterprise.
- Control is determined to exist through:
  - an immediate DI relationship where the direct investor owns more than 50 percent of the voting power in the direct investment enterprise (DIE); or
  - an indirect DI relationship arising from ownership of voting power in one DIE that owns voting power in another enterprise(s) via a chain of control.
- Definition aligned with the Framework of Direct Investment Relationship (FDIR) and sets rules for indirect transmission of control and influence along the chain of ownership.
- GN emphasizes control rather than ownership to ensure coherent and consistent data collection and to enable the “foreign-controlled” breakout in G20 DGI-2 Recommendation 8.
- GN notes control can exist with less than 50 percent of voting power (effective minority control), but practical difficulties for compilers lead to defining control based on the >50 percent threshold in practice.
- Statistical definition proposed:
  - An MNE is a legal entity that has at least one nonresident affiliate or branch, and exercises control over its affiliate(s) or branch(es) either directly—by owning over 50 percent of the voting power in the entity—or by indirect transmission of control.
  - The MNE is the ultimate controlling parent (UCP)—the direct investor at the top of the control chain.
  - The MNE group consists of the MNE and the set of legal entities—regardless of economies of residence—that are under the control of the same UCP.

### MNE group structures, SPEs, and economic implications
- MNEs operate through subsidiaries, branches, SPEs, and other affiliates; ownership structures range from simple UCP-affiliate structures to lengthy ownership chains and joint ventures.
- Certain SPE types in offshore financial centers often have small GDP contribution but may have large income flows and large financial stocks and flows, potentially exaggerating the role of these centers via pass-through capital and round-tripping.

### Practical implementation options and challenges
- GN presents three implementation options; Option 1 judged most practical by consultations.
- Key challenges:
  - Options 2 and 3 require considerable resources for data collection and linking, especially where ISAs and eSUTs are not produced.
  - Identification of units is challenging due to lack of granular information, resource intensity, and confidentiality issues.
  - Compilers should exchange aggregated data and information on adjustments that deviate from company accounts to avoid asymmetries while maintaining confidentiality.
- GN recommends emphasizing existing national and net indicators (Option 1) and introducing increased granularity via ISAs or eSUTs (Options 2 and 3) according to statistical capacity and policy needs.
- Suggest international organizations may provide technical assistance to build capacity so net income measures can be produced and disseminated regularly and at recommended quality.
- Proposes developing recommendations to differentiate material versus immaterial MNE activity for future standards updates.

### Changes proposed to the 2008 SNA and statistical outcomes
- Agreed recommendations:
  - Emphasize existing national and net indicators within the SNA framework (Option 1).
  - Introduce increased granularity and scope of supplementary data in the SNA using ISAs or extended SUTs (Options 2 and 3).
  - Integrate an MNE definition and align the control aspect in the SNA with BPM6 and BD4.
  - Adopt the decision tree in Figure 4 of Annex V (allocation of MNE units and SPE units to institutional sectors) as a replacement for Figure 4.1 of the 2008 SNA.
- Proposed additions and edits:
  - Add a new chapter to the next update of the SNA and BPM on globalization, including the agreed MNE definition, reference to updated definition of control in paragraph 4.81 aligned with BD4, and approaches indicating the dataset is encouraged only for countries with significant MNE presence.
  - Note that implementation may be economy-specific and encourage compilation of macroeconomic aggregates net of CFC with greater emphasis on net measures.
  - Include recommendation G.4 “Treatment of Special Purpose Entities and Residency” in the new chapter.
  - Edit 2008 SNA Chapters 4 and 21 (particularly paragraphs 4.81 and 21.47) to reflect full alignment with BPM6 and BD4 regarding control.
  - Identify additional institutional sub-sectors in Chapter 4, specifically a national private corporations which are part of domestic multinationals subsector for both domestically controlled nonfinancial/financial corporations’ sectors.
  - Adopt Figure 4 in Annex V as replacement for Figure 4.1 of the 2008 SNA.
- Rejected alternative:
  - Option 4 (redefining indicators outside core SNA) was rejected for inclusion in SNA update; such measures should be left to individual countries.

### G20 DGI.II Institutional Sector Accounts (Annex II: Figure 1) — Recommendation and structure
- Recommendation 8 of DGI.II requires all G20 economies compile and disseminate institutional sector accounts, on a quarterly and annual frequency, using an agreed template with minimum and encouraged breakdowns.
- Institutional breakdown — Nonfinancial Corporations (top-level split):
  - Total: S11
  - Domestically controlled (domestic): S11DO
  - Public nonfinancial corporations: S11001
  - Public nonfinancial corporations, which are part of domestic multinationals: S110011 (Of which)
  - National private nonfinancial corporations: S11002
  - National private nonfinancial corporations, which are part of domestic multinationals: S110021 (Of which)
  - Total (repeated column heading): S11003
- Institutional breakdown — Financial Corporations (top-level split):
  - Total: S12
  - Domestically controlled (domestic): S12DO
  - Public financial corporations: S12001
  - Public financial corporations, which are part of domestic multinationals: S120011 (Of which)
  - National private financial corporations: S12002
  - National private financial corporations, which are part of domestic multinationals: S120021 (Of which)
  - Total (repeated column heading): S12003

### Practical aspects and data sources for identifying MNE units (Annex VI)
- Key constraints:
  - Complex ownership structures, wide range of activities, absence of uniform data, and limited visibility of group operations for a single NSO.
  - Many business registers identify membership of foreign-controlled MNE groups and the country of the UCP, but few capture economic data on activities outside the domestic economy.
- Primary data sources:
  - Business registers (administrative inputs: tax registers, compulsory registration, social security).
  - Regulatory institutions (stock exchanges, tax authorities, investment promotion agencies).
  - Local enterprise group surveys with shareholder-structure information.
  - Direct investment (DI) statistics, complemented by additional sources.
- ADIMA and UN Global Groups Register (GGR) examples:
  - ADIMA: commercial data sources (e.g., Orbis), company reports, LEI Relationship Records, big data (WikiData, Common Crawl), combining affiliates into harmonized databases.
  - UN GGR: company reports, legal entity identifiers, big data sources; sources merged through fuzzy matching.
- Data exchange and shared business registers:
  - Global micro-data linking and bilateral exchange of business demographic, accounting, or business microdata recommended to avoid asymmetries and reconcile MNE data while maintaining confidentiality.
  - International efforts: UNSD developing a GGR; Europe’s EuroGroups Register (EGR) used by NSOs.
- Key information items in global enterprise registers:
  - Control relationships, economies of registration and identity numbers/names/addresses of nonresident legal units controlled by the entity, identity number or country of registration of the UCP.
  - Typical sources: MNE group websites, annual reports, corporate directories, investor relations information.
- Institutional arrangements and Large Case Units (LCUs):
  - Countries with significant MNE presence are encouraged to establish LCUs to collect consistent data from largest MNE groups, delineate statistical units, and resolve discrepancies early.
- Selection of MNEs for national accounts:
  - Focus on firms with complex ownership structures, large volumes of activities, rearrangements and relocations (including corporate inversions), and those that own IPPs.
  - NSOs should specify data items to be shared, including key globalization indicators, monetary flows between countries, restructuring and relocations, and accounting standards information.
- Use of internal and external business accounts:
  - Consolidated financial statements, legal-entity financial statements, and management accounts can be used; may require skilled statisticians and business analysts to integrate into standard statistical processes.

### Expert Advisory Group (AEG) and Direct Investment Task Team (DITT) conclusions
- AEG conclusions:
  - Concepts outside core SNA (e.g., GNI* or mainland GDP) should not be included in the SNA update; they are not internationally comparable and should be left to countries.
  - Conceptual superiority of net measures (NDP and NDI) relative to gross measures for analyzing MNE impact; need for improved guidance to produce internationally comparable measures of CFC.
  - Agree to define MNEs emphasizing control as shown in the FDIR and to introduce additional breakdowns (ISA, GVA by foreign/domestic control, eSUTs) with NSOs deciding which method to adopt.
  - Recommended GZTT coordination with United Nations Committee of Experts on Business and Trade Statistics on global groups registers and statistical business registers.
- DITT Consultation 1 outcomes:
  - Consensus on need for more focused communication by NSOs to emphasize indicators beyond GDP (GNI, GNDI, NNI, NNDI).
  - General agreement with defining MNEs by control (FDIR) while recognizing data and delineation challenges.
  - No clear preference among ISA, GVA, or eSUTs; eSUTs least favored due to resource intensity and confidentiality concerns.
- DITT Consultation 2 outcomes:
  - Proposed MNE definition and decision tree for allocating institutional units to foreign-controlled and domestically controlled subsectors.
  - Revised definitions adopted reflecting control via owning over 50 percent of voting power or indirect transmission of control.
  - Agreement to classify units according to residence of the ultimate controlling parent (UCP) and to use the decision tree (Annex V) for classification, with clarifications on round-tripping treatment.

*Guidance Note (GN) of the Globalization Task Team (GZTT), International Monetary Fund.*

### SECTION I: INTRODUCTION

### SECTION I: INTRODUCTION

### Background: role and organization of MNEs
- Multinational enterprises (MNEs) manage production, trade, direct investment, and international transfer of knowledge and technology with the aim of maximizing global profits.
- MNEs organize global production among affiliates across economies to leverage lower labor costs, friendlier regulatory environments, more educated workforces, market access, and tax advantages.
- Increasingly, MNEs have been establishing special purpose entities (SPEs) to channel financial investments globally and increase access to multiple financial markets.
- Prepared by Ms. Francien Berry (primary drafter, IMF), Ms. Padma Hurree-Gobin, and Ms. Jennifer Ribarsky (both GZTT Secretariat, IMF) under the supervision of Messrs. Michael Connolly and Branko Vitas (co-Chairs of the GZTT).
- The global consultation was held during June 21 to August 4, 2021: Fifty-five economies participated and submitted 59 complete responses.

### Measurement challenges posed by MNE and intra‑MNE flows
- Concepts of residence and economic presence are central to macroeconomic statistics but are less important to MNEs, increasing complexity in breaking down production by economy.
- The current methodological standards treat foreign affiliates of MNEs as resident in their respective economies of operation to place production where it occurs for GDP estimation.
- Transfer pricing on intra‑group flows—when prices do not reflect the “arm’s length” market valuation required by the System of National Accounts, 2008 (2008 SNA) and the Balance of Payments and International Investment Position Manual, sixth edition (BPM6)—and failure to record intra‑group use of intellectual property products may misallocate GDP between parent and affiliate economies.
- Estimates recorded by MNEs in national statistical surveys may not be best suited to meet the purposes of national accounts (NAs) and balance of payments.

### Significance and macroeconomic implications
- The extent of measurement issues is not easily quantified, but is significant given the growing size and importance of MNE activities.
- Mis-measurement can adversely affect key macroeconomic indicators.
- Impacts on GDP arise from misallocation between international trade in goods and services, income, and depreciation charges associated with movable corporate assets, especially intangible assets.
- Without robust accounting for MNE group activities, the reliability of NAs estimates for domestic policymaking may be challenged.

### Issues for discussion: Options considered by the GZTT
- The Globalization Task Team (GZTT) discussed four options to highlight MNE activities in the NAs:
  - Option 1: Emphasize existing indicators within the SNA (no change to core framework).
  - Option 2: Increase granularity and scope of supplementary data within the SNA using institutional sector accounts (ISAs).
  - Option 3: Provide more granularity within the SNA using extended supply and use tables (eSUTs).
  - Option 4: Extend beyond the core SNA framework by developing additional indicators (redefining existing indicators).
- Option 1: Emphasize that SNA produces several key indicators—gross national income (GNI), gross national disposable income (GNDI), net national income (NNI), and net national disposable income (NNDI)—which generally are less distorted by globalization and less sensitive to MNE impact than GDP.
- Option 2: Break down financial and nonfinancial corporations’ sectors to show foreign‑controlled corporations and domestic corporations that are part of MNEs, leveraging the G20 DGI-2 sectoral accounts template and the definition of control in BPM6 and OECD BD4.
- Option 3: Use eSUTs to break industries into enterprises operating domestically, enterprises controlled by domestic MNEs, and foreign controlled affiliates of foreign MNEs to better understand effects on industry and product flows for trade in value added and global value chain analyses.
- Option 4: Consider redefining existing indicators within the SNA framework, exemplified by the GNI* (modified GNI) measure developed by the Irish Economic Statistics Review Group (ESRG).

### Existing methodological material and guidance
- The 2008 SNA and BPM6 introduced clarifications on institutional units, residence, economic presence, and economic ownership relevant to MNE measurement.
- The 2008 SNA generally treats a nonresident unit as controlling a resident corporation if the nonresident owns 50 percent of equity, while recognizing control may exist with less than half the equity when other powers indicate possible control.
- The 2008 SNA and BPM6 provide conceptual guidance related to transfer pricing on intra‑MNE group flows.
- Additional guidance includes: Chapter 2 of The Impact of Globalization on National Accounts, work by the IMF Committee on Balance of Payments Statistics (BOPCOM), and the G20 DGI-2 Recommendation 8 encouraging separate identification of foreign‑controlled corporations and corporations that are part of domestic MNEs through the sequence of accounts.
- Academic and technical contributions (e.g., Ahmad (2018)) propose constructing eSUTs with breakdowns by ownership structures.

### Consultation feedback and assessment of options
- The GZTT considered advantages and weaknesses of each option and reviewed global consultation feedback.
- The GZTT noted that where GDP is severely impacted by globalization, indicators beyond GDP—NDP, GNI, GNDI, NNI, and NNDI—facilitate in‑depth analysis of MNE impacts and better reflect realities of highly globalized economies.
- Option 1 advantages: international comparability and limited need for significant adjustments by compilers.
- Majority of respondents to the global consultation supported putting more emphasis on net measures; however, some GZTT members preferred gross measures.
- It was noted that compiling internationally comparable measures of consumption of fixed capital (CFC) is challenging; gross measures are more readily available, reliable, and internationally comparable than net measures.
- The consultation affirmed NSOs could continue to highlight analytical indicators and refocus users through education and communication.
- Option 2 received majority support in the global consultation: ISAs provide coherent granularity across nonfinancial accounts, financial accounts, and balance sheets to distinguish activity driven by domestic firms versus MNEs.
- Consultation showed little support for detailed breakdown at the financial subsector level due to data intensity.
- Option 3 (eSUTs) was seen as conceptually viable but too ambitious and resource intensive for consistent implementation across countries: around one-third of respondents supported eSUTs; about 45 percent supported a compromise to break down GVA by relevant industries according to domestic MNEs versus foreign controlled affiliates.

### Recommended conceptual approach
- The GZTT agreed to encourage the use of additional key gross and net indicators within the NAs to better highlight MNE activities.
- The GZTT reinforced the ISA supplementary presentation supported by the existing SNA framework, recommending:
  - Separately identifying domestic MNEs.
  - Identifying an aggregate foreign-controlled nonfinancial/financial corporations’ category.
  - Using the foreign/domestic split to help policymakers distinguish between domestic firm–driven activity and foreign MNE–driven activity.
- GZTT recognized the need for a clearer statistical definition of MNEs and a clear distinction between the MNE and the MNE group to enable macroeconomic statistics that reflect the scale and scope of MNE group activities.

*Source: Globalization Task Team (GZTT), SECTION I: INTRODUCTION.*

### 22.      The GZTT proposes a statistical definition of MNEs which emphasizes “control”  as

### The GZTT proposes a statistical definition of MNEs which emphasizes “control” as

### Definition of control within enterprise groups
- Control refers to the ability of one enterprise to exercise the voting power associated with their shareholdings to affect strategic management decisions of another enterprise.
- Control is determined to exist through:
  - an immediate DI relationship where the direct investor owns more than 50 percent of the voting power in the direct investment enterprise (DIE); or
  - an indirect DI relationship arising from ownership of voting power in one direct investment enterprise that owns voting power in another enterprise(s)—indirectly through a chain of control.
- The definition of control is aligned with the Framework of Direct Investment Relationship (FDIR) and sets rules for indirect transmission of control and influence along the chain of ownership.
- The GN emphasizes control rather than ownership to ensure coherent and consistent data collection and to enable the detailed “foreign-controlled” breakout proposed in G20 DGI-2 Recommendation 8.
- The GN notes that control can exist with less than 50 percent of voting power (effective minority control), but recognizes practical difficulties for compilers because evidence (e.g., voting power within the group) may not be readily accessible. To avoid subjective judgement, the GZTT proposes defining control as in paragraph 23.

### Statistical definition of MNE
- An MNE is proposed to be defined as a legal entity that:
  - has at least one nonresident affiliate or branch, and;
  - exercises control over its affiliate(s) or branch(es) either directly—by owning over 50 percent of the voting power in the entity—or by indirect transmission of control.
- The MNE is the ultimate controlling parent (UCP)—the direct investor at the top of the control chain.
- The MNE group consists of the MNE and the set of legal entities—regardless of their economies of residence—that are under the control of the same UCP.
- The statistical definition is based on the concept of institutional unit and control (direct or indirect) to support identification of foreign-controlled units and units that are part of domestic MNE groups.

### MNE group structures, SPEs, and economic implications
- MNEs operate through subsidiaries, branches, SPEs, and other affiliates across different economies and can have vertically and horizontally complex ownership structures, including:
  - simple UCP-affiliates structures (no further linkages);
  - lengthy ownership chains with multiple cross-border links (e.g., cross-border global value chains);
  - joint ventures (JVs), where typically the MNE and the independent unit each own 50 percent of the voting power.
- Certain types of SPEs are used, usually in offshore financial centers, to leverage tax and other fiscal advantages; these SPEs often have relatively small contribution to GDP but may have large income flows and large financial stocks and flows, potentially exaggerating the role of these centers in international financial transactions through pass-through capital and round-tripping.
- The GN references Chapter 4 of the Impact of Globalization on National Accounts for more detail on SPE types and motivations.

### Practical implementation and recommended approaches
- The GN presents three options for practical implementation; Option 1 is deemed the most practical by consultations.
- Key practical implications and challenges:
  - Options 2 and 3 require considerable resources for data collection and linking, especially where ISAs and eSUTs are not already produced.
  - A cost-benefit analysis is recommended given varying statistical capacity across countries.
  - Identification of units is challenging due to lack of readily available granular information on MNEs, resource intensity, and confidentiality issues.
  - Compilers should exchange aggregated data and information on adjustments that deviate from company accounts to avoid asymmetries while maintaining confidentiality.
- The GN recommends emphasizing existing “national and net” indicators within the existing SNA framework (Option 1) and introducing increased granularity via ISAs or extended supply and use tables for Options 2 and 3.
- The GN suggests international organizations may provide technical assistance to build capacity so net income measures can be produced and disseminated regularly and at recommended quality.
- The GN proposes developing recommendations to differentiate material versus immaterial MNE activity for measurement in a future standards update.

### Changes required to the 2008 SNA and statistical outcomes
- Agreed recommendations to:
  - Emphasize existing “national and net” indicators within the SNA framework (Option 1).
  - Introduce increased granularity and scope of supplementary data in the SNA using ISAs or extended SUTs (Options 2 and 3).
  - Integrate an MNE definition and align the control aspect in the SNA with BPM6 and BD4.
  - Adopt the decision tree in Figure 4 of Annex V (allocation of MNE units and SPE units to institutional sectors) as a replacement for Figure 4.1 of the 2008 SNA.
- Proposed additions and edits:
  - Add a new chapter to the next update of the SNA and BPM on globalization, including the agreed MNE definition, reference to updated definition of control in paragraph 4.81 aligned with BD4, and approaches indicating the dataset is encouraged only for countries with significant MNE presence.
  - Note that any approach may be implemented based on an economy’s statistical infrastructure and policy needs, and encourage compilation of macroeconomic aggregates net of CFC with greater emphasis on net measures.
  - Include recommendation G.4 “Treatment of Special Purpose Entities and Residency” in the new chapter.
  - Edit 2008 SNA Chapters 4 and 21 (particularly paragraphs 4.81 and 21.47) to reflect full alignment with BPM6 and BD4 regarding control.
  - Identify additional institutional sub-sectors in Chapter 4, specifically a national private corporations which are part of domestic multinationals subsector for both domestically controlled nonfinancial/financial corporations’ sectors.
  - Adopt Figure 4 in Annex V as replacement for Figure 4.1 of the 2008 SNA.

### Rejected alternative
- Option 4 was rejected by consultations. While such indicators can be useful to examine globalization impacts, they should be left to individual countries’ compiling institutions to define and compile based on specific circumstances and policy needs.
- Emphasis should be placed on internationally comparable indicators already existing within the current SNA framework.

*Guidance Note (GN) of the Globalization Task Team (GZTT).*

### Annex II. Figure 1.  G20 Data Gaps Initiative-2 (DGI.II ) Institutional Sector Accounts

### Annex II. Figure 1. G20 Data Gaps Initiative-2 (DGI.II) Institutional Sector Accounts

### Recommendation and purpose
- Recommendation 8 of DGI.II requires all G20 economies compile and disseminate institutional sector accounts, on a quarterly and annual frequency.
- Compilation is based on the internationally agreed template which provides minimum and encouraged breakdowns by sector and instrument.

### Institutional breakdown — Nonfinancial Corporations
- Top-level split: Domestically controlled nonfinancial corporations / Foreign-controlled nonfinancial corporations.
- Sectoral entries and codes:
  - Total: S11
  - Domestically controlled (domestic): S11DO
  - Public nonfinancial corporations: S11001
  - Public nonfinancial corporations, which are part of domestic multinationals: S110011 (Of which)
  - National private nonfinancial corporations: S11002
  - National private nonfinancial corporations, which are part of domestic multinationals: S110021 (Of which)
  - Total (repeated column heading): S11003

### Institutional breakdown — Financial Corporations
- Top-level split: Domestically controlled financial corporations / Foreign-controlled financial corporations.
- Sectoral entries and codes:
  - Total: S12
  - Domestically controlled (domestic): S12DO
  - Public financial corporations: S12001
  - Public financial corporations, which are part of domestic multinationals: S120011 (Of which)
  - National private financial corporations: S12002
  - National private financial corporations, which are part of domestic multinationals: S120021 (Of which)
  - Total (repeated column heading): S12003

### Legend and classification guidance
- Symbols: "=" denotes Target and "=" denotes Encouraged (legend present in figure).

### Related analytical extensions (Annex III and following)
- Ahmad (2018) proposes extensions to the 2008 SNA supply-and-use tables (Chapter 14) to better capture globalization effects by breaking down activities into more homogeneous groupings (e.g., foreign-owned affiliates, domestic MNEs with affiliates abroad, domestic firms with no affiliates).
- An ownership-focused extended Supply-and-Use Table (eSUT) is illustrated; “foreign-owned” should be read as “foreign-controlled” as defined in the Guidance Note.
- Recognized trade-off: the full level of decomposition may be administratively burdensome; a feasible compromise is to break down GVA by relevant industries according to domestic MNEs versus foreign-controlled affiliates of foreign MNEs.
- Ahmad (2018) is deliberately not prescriptive; national implementation depends on statistical capacity and policy demands.

### Practical aspects and challenges of identifying MNE units (Annex VI)
- Key constraints:
  - Complex ownership structures, wide range of activities, absence of uniform data, and limited visibility of group operations for a single NSO.
  - National compilers often see only parts of global activities; complete and symmetric views require linking entities within the group.
  - Many business registers identify membership of foreign-controlled MNE groups and the country of the UCP, but few capture economic data on activities outside the domestic economy.

- Primary data sources to identify MNE groups:
  - Business registers: completeness must be assessed; administrative inputs may include tax registers, compulsory registration, social security, and other public/private data.
  - Regulatory institutions: local and international stock exchanges, tax authorities, investment promotion agencies.
  - Local enterprise group surveys: when they contain shareholder-structure information.
  - Direct investment (DI) statistics are essential inputs but should be complemented by additional sources.

- Box summarizing ADIMA and GGR data sources:
  - ADIMA: Commercial data sources (e.g., Orbis), company reports and regulatory submissions, LEI Relationship Records, big data sources (WikiData, Common Crawl), and combining affiliates from multiple sources into a single harmonized database.
  - UN Global Groups Register (GGR): Company reports and regulatory submissions, Legal Entity Identifiers, big data sources (google, Wikipedia); sources merged through fuzzy matching.

- Data exchange and shared business registers:
  - Global micro-data linking and bilateral exchange of business demographic, accounting, or business microdata are needed to avoid asymmetries and reconcile MNE data while maintaining confidentiality.
  - International efforts: UNSD developing a GGR; Europe’s EuroGroups Register (EGR) is used by NSOs to compile MNE-related statistics and facilitate consistent, high-quality statistics.

- Key information items in global enterprise registers for identifying MNE groups:
  - Control of the unit: resident legal units controlled by the entity; resident legal unit that controls the entity.
  - Economies of registration and identity number(s)/name(s)/address(es) of nonresident legal units controlled by the entity.
  - Economies of registration and identity of the nonresident legal unit which controls the entity.
  - Identity number of the UCP (legal entity), or if nonresident, its country of registration (optionally identity number, name and address if available).
  - Typical sources for this information include MNE group websites, annual reports, corporate directories, investor relations information, or company profiles.

- Institutional arrangements and Large Case Units (LCUs):
  - More structured institutional arrangements are important; countries with significant MNE presence are encouraged to establish LCUs.
  - Objectives of an LCU: provide consistent data from largest MNE groups to statistical domains, ensure timely and accurate data collection, delineate and classify statistical units of MNEs (establishment versus enterprise basis), and resolve discrepancies early in the production process.
  - Several countries already have LCUs dedicated to collection and analysis of data from large MNEs; LCUs should engage in ongoing consistency assessment across statistical domains.

- Selection of MNEs for national accounts:
  - Focus on firms with complex ownership structures, large volumes of activities, rearrangements and relocations (including corporate inversions), and those that own IPPs.
  - Once MNE population is identified, NSOs should specify data items to be shared, including key globalization indicators, monetary flows between countries, restructuring and relocations, and accounting standards information for reconciliation.

- Use of internal and external business accounts:
  - Consolidated financial statements are available for groups; financial statements at legal-entity level and management accounts may provide higher-quality information for statistical purposes but can be enterprise-specific and require substantial effort from skilled statisticians and business analysts.
  - NSOs must engage with MNEs and strengthen capability to classify, analyze, and integrate such data into standard statistical processes.

### Expert Advisory Group (AEG) outcome (Annex VII)
- The AEG agreed with recommendations I and II to emphasize existing “national and net” indicators within the current SNA framework and to introduce additional granularity to highlight MNE activities.
- Additional granularity can take the form of new sub-sectors (as in the ISA framework) or more granular industry breakdowns (the GVA proposal).

*Source: G20 Data Gaps Initiative-2 (DGI.II), Annex II. Figure 1. Institutional Sector Accounts (Financial and Nonfinancial Corporations) and related annexes.*

### 2.      The AEG unanimously agreed that concepts which are outside core SNA framework such

### g2-treatment-of-mne-and-intramne-flows - 2.      The AEG unanimously agreed that concepts which are outside core SNA framework such

### AEG conclusions on scope and indicators
- The AEG unanimously agreed that concepts which are outside core SNA framework such as GNI* or mainland GDP should not be included in the update of the SNA.
- Rationale: While these measures may be useful, they are not internationally comparable and should therefore be left to countries to implement based on their policy needs.
- On preferred indicators, the AEG agreed with the conceptual superiority of using net measures such as NDP and NDI relative to gross measures to facilitate the analysis of the impact of MNEs activities on the domestic economy.
- The AEG recognized the need to develop improved guidance to produce internationally comparable measures of CFC.
- The AEG agreed that national accounts should define MNEs by emphasizing the control aspect shown in the FDIR.
- The AEG noted conceptual tensions between control and ownership as well as ownership and residency and highlighted the need for a clear framework to determine control to facilitate data collection efforts.
- On approaches to highlighting MNEs’ activities in the national accounts, the AEG acknowledged the analytical usefulness of introducing additional breakdowns:
  - institutional sector accounts (disaggregated into foreign-controlled affiliates and domestically controlled affiliates of MNEs, as designed in recommendation 8 of G20 DGI.II);
  - gross value added by industry disaggregated into foreign-controlled and domestically controlled units;
  - extended/satellite supply and use tables.
- The AEG expressed that NSOs should be allowed to decide which method to adopt based on their statistical production process and the analytical and policy needs of users.
- The AEG recommended that the GZTT coordinates with the United Nations Committee of Experts on Business and Trade Statistics, which is working on global groups registers and statistical business registers, to ensure the development of consistent recommendations.

### Direct Investment Task Team (DITT) — Consultation 1: outcomes and preferences
- All DITT members agreed that there should be more focused communication by NSOs to emphasize the indicators—beyond GDP—that currently exist within the SNA framework.
- Members agreed that regardless of whether NSOs choose to adopt either the ISA, GVA, or ESUTs approach to provide additional granularity, increased user education regarding indicators such as GNI, GNDI, NNI, and NNDI would be analytically useful.
- The DITT generally agreed with the proposal to define MNEs by emphasizing control as defined in the FDIR, while recognizing issues:
  - delineating a chain of relationships;
  - compiling data for the enterprise relative to the establishment;
  - the need for a precise definition of control and clearer definition of MNEs.
- On the three approaches to highlighting MNEs (ISA, GVA, ESUTs):
  - There was no clear preference from the DITT.
  - The extended supply and use table approach was least favored due to being resource intensive and raising issues of confidentiality, especially for smaller economies.
  - Data availability may limit implementation of the ISA approach where statistical operations are based on surveys or models instead of financial records.
  - Practical issues were noted that may impact implementation of these approaches.

### Direct Investment Task Team (DITT) — Consultation 2: definition, classification, and decision tree
- The GZTT proposed a definition for MNEs and a decision tree for allocating institutional units that belong to MNE groups to the SNA foreign controlled sector and the domestically controlled MNE subsectors.
- Most respondents highlighted a need to more clearly distinguish between the MNE and the MNE group and to more explicitly cover inward direct investments, global value chains, the treatment of SPEs including round-tripping.
- Revised definitions adopted:
  - MNE: “a legal entity that has one nonresident affiliate or branch and exercises control over its affiliate(s) or branch(es) either directly—by owning over 50 percent of the voting power in the entity—or by indirect transmission of control.”
  - MNE group: “... the parent (MNE) and the set of legal entities—regardless of their economies of residence—that are under the control (direct or indirect), of the same UCP.”
- Additional information was provided in the GN (paragraph 28) to reflect the various ownership or organizations of MNE groups.
- On geographical classification:
  - DITT members generally agreed with classifying institutional units within institutional sector accounts according to the residence of the ultimate controlling parent (UCP).
  - Institutional units that belong to MNE groups can be classified as purported by the decision tree (Annex V of the GN).
- On the decision tree:
  - The DITT members generally agreed with the decision tree as shown in Annex V.
  - Some uncertainties were identified regarding the treatment of round-tripping (pass-through funds invested in an affiliate in a second economy, before being re-invested into a third affiliate in the ultimate investing economy (UIC)).
  - The GN was revised to show that the domestic affiliate is treated as a national corporation that is part of domestic MNEs—even though the immediate parent is nonresident.
  - The classification of MNE units according to UCP dictates this treatment.

---


_Source: https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/g2-treatment-of-mne-and-intramne-flows.pdf_