## tnmea2022006

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### Purpose, scope, and users’ needs
- Objective:
  - Operationalize the agreed definition of special purpose entities (SPEs) and enable separate identification of their cross-border flows and positions within external sector statistics (ESS).
- Aimed users:
  - National compilers, balance of payments and IIP compilers, policymakers, market analysts, and other ESS users needing separately identified SPE statistics.
- Core aims of the Guidelines:
  - Implementation guidance on the SPE definition.
  - Advice on data sources and compilation processes.
  - Reporting advice within the agreed Data Template.
- Context and rationale:
  - Growing role of MNEs and SPEs in global financial structures, including nonfinancial specialized entities managing intellectual property rights, R&D, trade, and other activities.
  - Separate identification improves assessment of economic impact of cross-border flows, understanding of MNE activities, detection of cross-border vulnerabilities, and evaluation of data quality and coverage.
- Timeline and institutional background:
  - Separate identification of SPEs a Committee priority since 2016.
  - An internationally agreed SPE definition was endorsed by the Committee at its October 2018 meeting.
  - Guidelines align residence, institutional unit, and control with BPM6.

### Agreed SPE definition and implementation tools
- Agreed definition (verbatim, ESS context):
  - "An SPE, resident in an economy, is a formally registered and/or incorporated legal entity recognized as an institutional unit, with no or little employment up to a maximum of five employees, no or little physical presence and no or little physical production in the host economy.
  SPEs are directly or indirectly controlled by nonresidents.
  SPEs are established to obtain specific advantages provided by the host jurisdiction with an objective to (1) grant its owner(s) access to capital markets or sophisticated financial services; and/or (2) isolate owner(s) from financial risks; and/or (3) reduce regulatory and tax burden; and/or (iv) safeguard confidentiality of their transactions and owner(s).
  SPEs transact almost entirely with nonresidents and a large part of their financial balance sheet typically consists of cross-border claims and liabilities."
- Implementation tools provided:
  - Decision tree (flow chart, Figure 1) to guide identification of resident SPEs.
  - Typology mapping SPE types to institutional sectors (Annex 1).
  - Illustrative summary cards for main SPE types (Annex 2).
- Scope clarification:
  - Definition applies to SPEs directly or indirectly controlled by nonresidents; does not explicitly cover domestic-to-domestic SPE relationships.

### Decision tree and core identification criteria
- Decision-tree sequential questions (flexible sequencing permitted):
  - Is the entity formally registered and/or an incorporated resident institutional unit?
  - Is the institutional unit directly or indirectly controlled by nonresident(s)?
  - Was the unit established with one or more of the four objectives in the SPE definition?
  - Does the unit satisfy the criteria of having no or up to five employees?
  - Does the unit transact almost entirely with nonresidents?
- Possible outcomes:
  - The entity is an SPE; Not an SPE; Nonresident unit.
- Consistency emphasis:
  - Decision tree underscores consistency with BPM6 concepts of “residence,” “institutional unit,” and “control.”

### Residence, institutional unit, and control (technical criteria)
- Residence (A):
  - Determined by the economic territory with which the institutional unit has the strongest connection (center of predominant economic interest).
  - For SPEs with little or no physical presence, residence is determined by place of incorporation or registration (BPM6, paragraph 4.115d; 2008 SNA paragraph 4.56).
  - Each institutional unit is resident in one and only one economic territory.
- Institutional unit (B):
  - Defined as an economic entity capable of owning assets, incurring liabilities, and engaging in economic activity; autonomy of decision required.
  - SPEs lacking autonomy should, in principle, be regarded as part of the parent and consolidated, except when resident in a different economy than the parent (2008 SNA paragraph 4.61).
- Direct or indirect control by nonresidents (C):
  - Control exists if the direct investor owns more than 50 percent of voting power in the DI enterprise either directly or indirectly through a chain.
  - Chain-control numeric illustration:
    - A chain with each link involving 60 percent voting power results in indirect equity of 36 percent at the second level (60 percent of 60 percent), 21.6 percent at the third level (60 percent of 36 percent), and so on.
  - Framework for Direct Investment Relationships (FDIR) rules allow control to pass down a chain if control exists at each stage or when the investor and its subsidiaries combined own more than 50 percent of voting power.
  - Immediate DI transmission criterion: 10 percent or more of voting power applies to immediate direct investment (FDIR context).
  - Practical data sources for control determination include business registers, regulatory institution records, and local enterprise group surveys.

### Objectives for establishing SPEs and third-party indicators
- Primary objectives (from definition):
  - (1) Access to capital markets or sophisticated financial services.
  - (2) Isolate owners from financial risks.
  - (3) Reduce regulatory and tax burden.
  - (4) Safeguard confidentiality of transactions and owners.
- Typical host-jurisdiction attractive features:
  - Tax advantages: participation exemptions, low withholding tax (WHT) rates on dividends, interest, and royalties.
  - Bilateral tax treaties (BTTs) lowering WHT rates.
  - Preferential treatment of income from intellectual property.
  - Non-tax factors: well-developed international financial center (IFC) ecosystem, access to capital markets, skilled multilingual workforce, stable political/social climate.
- Use of third-party indicators (TPIs):
  - TPIs may complement compilers’ knowledge but require judgment due to methodological differences, opacity, and quality issues.

### Employment, physical presence, and balance-sheet orientation criteria
- Five-employee threshold (E):
  - SPEs defined as having no or up to a maximum of five employees.
  - Rationale: practical applicability and reflection of reduced physical presence; entities above five employees are classified as “near-SPEs.”
  - Consultation context: some jurisdictions may require minimum employment causing entities to “artificially” employ staff.
  - The up-to-five rule applies irrespective of employment type (direct payroll or via employment agencies).
- No or little physical presence (F):
  - No specific numerical threshold recommended for physical presence; indicators suggested include ratios of material fixed assets, trade receivables, turnover to total assets, zero or minimal domestic turnover, and caps on gross book value of property, plant, and equipment.
  - Typical minimal presence: physical address, electronic communications, possibly small premises if legally required.
  - Nonfinancial assets typically limited to intangible or mobile tangible assets.
- Nonresident share of total balance sheet criterion (G):
  - SPEs typically have a large part of their financial balance sheet in cross-border assets and liabilities and transact mostly with nonresidents.
  - Criterion most applicable in pass-through direct investment; financial SPEs almost exclusively hold financial assets/liabilities.
  - Nonfinancial SPEs mainly collecting royalties/fees from residents should not be treated as SPEs due to close domestic links.

### Typology of SPEs (Annex 1): categories and illustrative cards
- Annex 1 purpose:
  - Delineates SPE types by economic function and maps to 2008 SNA institutional sectors.
  - Notes that not all entities in listed types are necessarily SPEs; the decision tree and definition guide determination.
- Major categories (selected highlights):
  - Category I: Corporate Groups’ Captive Financial Entities (S127) — conduits, holding companies, intra-group lending, captive factoring/invoicing, captive financial leasing, other captive financial companies.
  - Category II: Specialized Financial Entities — captive insurance (S128), securitization vehicles/financial vehicle corporations (S125/S127), holding financial/nonfinancial assets (S11 and S125).
  - Category III: Corporate Groups’ Nonfinancial Entities (S11) — ancillary companies, operational leasing, merchanting, royalty/licensing companies, legal ownership of intangible assets.
  - Category IV: Wealth management entities — family trust/foundations, personal holding companies (S11 and S127).
  - Category V: Government owned financial entities — SPEs owned by governments for fiscal purposes (S11, S12, or S15).
  - Category VI: Other structures — catch-all for other SPE-like transactions.
- Illustrative summary cards:
  - Each card includes Description/Function, General Characteristics (Institutional Sector, Activity Code, Can have resident parent?, Can have production?, FDI Pass through investment), Prototype Balance Sheet (selected line items), and Example diagram.
  - Selected card examples and key numeric/textual attributes preserved exactly:
    - Conduit: Institutional Sector S127; Activity Code ISIC Section K 6499; Can have resident parent? NO; Can have production? NO; FDI Pass through investment? NO.
    - Holding Corporation: Institutional Sector S127; Activity Code ISIC Section K 6420; Can have resident parent? NO; Can have production? NO; FDI Pass through investment? YES.
    - Captive Financial Leasing: Institutional Sector S127; Activity Code ISIC Section K 6491; Can have resident parent? NO; Can have production? YES.
    - Securitization Vehicles/FVC: Institutional Sector S125 / S127; Activity Code ISIC Section 6499; Can have resident parent? YES; Can have production? NO.
    - Operational Leasing: Institutional Sector S.11; Activity Code ISIC Section N 7730; Can have resident parent? NO; Can have production? YES.
    - Merchanting: Institutional Sector S.11; Activity Code ISIC Section G 4600; Can have resident parent? NO; Can have production? YES.
    - Royalty and Licensing: Institutional Sector S.11; Can have resident parent? YES; Can have production? YES.
    - Personal/family wealth management: Institutional Sector S.127; Activity Code ISIC Section K 6430; Can have resident parent? YES; Can have production? NO.

### Securitization vehicles and investment funds: classification nuances
- Securitization vehicles:
  - Function: structured finance, repackaging, issuing debt/securitization fund units, and isolating originator payment obligations (BPM6 paragraph 4.78).
  - If meeting SPE characteristics (no employees, nonresident control, large cross-border balance sheet share), compilers should include them in the SPE population.
  - Orphan securitization vehicles (shares held by charitable trust and professional directors) with no nonresident control would not be SPEs under the current definition.
  - Functional classification of securitization-related assets/liabilities can vary between DI, other investment, and portfolio investment.
- Investment funds (IFs):
  - Non-money market IFs (mutual funds, ETFs, hedge funds) do not meet the SPE definition and should not be considered SPEs.
  - IFs technically created as a subsidiary with a clear limited scope to fund specific assets could be treated as SPEs if they meet the SPE definition.

### Data collection practices, institutional arrangements, and challenges
- Institutional arrangements and collaboration:
  - Many host economies license/regulate SPEs through specific agencies; data often collected via general balance of payments frameworks.
  - Confidentiality concerns necessitate legal arrangements and MOUs for data sharing.
- For economies without systematic processes:
  - Recommended actions: designate a lead agency, form inter-institutional working groups, establish legal arrangements, and secure high-level endorsement.
- Common challenges:
  - a. Multiple stakeholders (FIUs, LEAs, regulators, private sector) needing shared understanding of macroeconomic statistics rationale.
  - b. Definitional issues and residence concept differences between macro and fiscal statistics.
  - c. Incompatible data formats and coverage across agencies requiring harmonization.
- Operational recommendations:
  - Lead agency to proactively engage stakeholders, designate contact points, establish timelines and templates, and create MOUs to facilitate data sharing while preserving confidentiality.
- Data collection methods and practices:
  - Dedicated surveys used in almost all countries; frequency ranges from monthly/quarterly to annual.
  - Link SPE data collection to business registers and administrative data for cost savings and better sampling frames.
  - Undercoverage risk: SPEs often small in employment but large in financial assets; selection variables and reporting thresholds need careful design.
  - Sampling example: Mauritius used a sample survey where twelve resident management companies administered 70 percent of SPEs’ total assets and reported cross-border data on 75 percent of SPEs’ total balance sheet; results were grossed up despite grossing-up challenges.
  - Registers: Creating and maintaining SPE registers (e.g., Mauritius, Seychelles) supports timely identification of major new players.
  - LEI enhancements: LEI framework enhancements (including direct/ultimate parent info) may support register construction; usefulness depends on being “readily available.” ISIN cited as analogous for portfolio instruments.

### Data reporting template: scope, components, and levels
- Purpose and endorsement:
  - Template designed with international organizations and country authorities; endorsed by the Committee in October 2018 to provide comparable, separately identified SPE-related cross-border statistics.
- Design features:
  - Targets selected balance of payments and IIP components relevant to SPEs using BPM6 standard reporting lines.
  - Two reporting levels: minimum (yellow cells) and encouraged (blue cells).
- Financial account (Table 1) highlights:
  - DI lines split by DI investor direction: direct investor in DI enterprise (DIE), reverse investment, and between fellow enterprises with sub-classification by whether ultimate controlling parent is resident, nonresident, or unknown.
  - Portfolio investment split between equity and debt securities; minimum detail by instrument requested; maturity breakdown for debt securities encouraged.
  - Other investment included only as a total (minimum); short-/long-term breakdown encouraged.
  - Financial derivatives identified separately.
- Capital and current account (Table 2) highlights:
  - Capital account separates gross acquisitions/disposals of non-produced nonfinancial assets relevant for SPEs owning intellectual property rights: (a) natural resources; (b) contracts, leases, and licenses; (c) marketing assets (and goodwill) (BPM6, paragraphs 13.9–13.21).
  - Current account includes goods related to SPEs with a separate line for net merchanting by resident SPEs (BPM6 paragraphs 10.41–10.49).
  - Four services components relevant for SPEs: transport; financial services; charges for the use of intellectual property n.i.e; other business services (with BPM6 paragraph cross-references).
  - Primary income (investment income) related to SPEs included; DI-related investment income requested as minimum reporting.
  - Secondary income (current transfers) and applicable current taxes included where relevant (BPM6, Chapter 12).
- Template presentation:
  - Financial account components split into "Flows during the current year 20XX" and "Position as at end of current year 20XX" for Assets and Liabilities with defined items for DI, Portfolio investment, Other investment, and Financial derivatives.
  - Capital and current account components presented as "Flows during the current year" with specified lines for capital and current account items relevant to SPEs.

### Special Purpose Units of General Government (Section 13)
- Description/function:
  - Government entity raising or borrowing funds on behalf of general government; requires nonresident parent.
  - Special treatment per BPM6 paragraph 8.25: when a nonresident entity undertakes functions at the behest of general government for public policy (not commercial) purposes.
- Accounting treatment:
  - At borrowing: impute a transaction creating a debt liability of the government to the borrowing entity equal to the borrowing amount; corresponding increase in government’s equity in the borrowing entity.
  - When funds are passed to the government: show the flow of funds as a transaction, matched by a reduction of government’s equity in the borrowing entity by the same amount.
- General characteristics and prototype balance sheet (preserved structure):
  - Institutional Sector: S127; Activity Code: K; Can have resident parent? NO; Can have production? NO; FDI Pass through investment: NO.
  - Prototype Balance Sheet items listed for Assets and Liabilities across Non-Financial Assets, Direct (Foreign) Investment (Equity, Debt), Portfolio Investment (Equity, Debt), Other Investment (Loans, Currency and Deposits).

### Country practices (selected excerpts)
- Hungary:
  - SPEs mostly weakly tied to Hungarian economy; involved in intra-group intermediation.
  - Identification uses monthly/quarterly/annual questionnaires and indicators such as negligible non-financial asset ratio, staff counts of 1–3 persons, and turnover not exceeding HUF 500 million annually.
  - Cross-border SPEs separately identified: Yes.
- Luxembourg:
  - Majority are Captive Financial Institutions; reporting includes quarterly full balance sheet, quarterly derivatives and non-financial assets transactions, and monthly security-by-security reports.
  - Cross-border SPEs separately identified: Yes.
- Mauritius:
  - SPE activities include aircraft financing/leasing, assets management, licensing, insurance, shipping, trading, and more.
  - Annual sample survey; management companies report on behalf of SPEs; two SPE types: GBC1 and GBC2 with differing tax residency and operational constraints.
  - Cross-border SPEs separately identified: Yes.
- Netherlands:
  - Criteria include being resident but ultimately controlled by nonresidents, at least 90% of foreign assets/liabilities, and domestic turnover not exceeding EUR 25 million.
  - DNB maintains a separate business register for SFIs.
  - Cross-border SPEs separately identified: Yes.
- Seychelles:
  - Companies Special License (CSL) data collected via annual sample survey; FSA coordinates survey on behalf of Central Bank under an MOU.
  - Cross-border SPEs separately identified: Yes.

*tnmea2022006 — Preface, Introduction, Defining SPEs, Decision tree, Annex 1 typology, data collection practices, reporting template, and Section 13 Special Purpose Units of General Government (Technical Notes and Manuals 22/06 | 2022).*

### Preface                                                                                                                 

### tnmea2022006 - Preface

### Preface — purpose and scope
- The Special Purpose Entities: Guidelines for a Data Template (the Guidelines) were developed at the request of the IMF Committee on Balance of Payments Statistics (the Committee) to operationalize the agreed definition of special purpose entities (SPEs) and to enable separate identification of their cross-border flows and positions within external sector statistics (ESS).
- The Guidelines aim to assist compilers in practical application of the agreed SPE definition, data collection, and reporting within the agreed Data Template by providing advice on:
  - implementation of the definition of SPEs;
  - possible data sources and processes for collecting and compiling SPE-related statistics;
  - reporting within the agreed Data Template.
- The Guidelines align key concepts such as residence, institutional unit, and control with the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).
- The Guidelines provide operational guidance on: objectives for establishing SPEs; the employment criterium (threshold); the criterium on transacting with nonresidents; chains of SPEs; and SPEs that are part of local enterprise groups.
- The Guidelines draw on consultations with member countries and international/regional organizations, inputs from the Task Force on SPEs (TFSPE), and experiences of selected SPE-host economies. Country examples and current collection practices are provided in an Annex.

### Introduction — rationale and users’ needs
- Context:
  - Multinational enterprises (MNEs) increasingly set up global structures to benefit from different legal and tax regimes to maximize global after-tax profits.
  - SPEs play an important role in the complex global financial system with increased cross-border flows and positions.
  - SPEs have evolved beyond traditional financial activities to include nonfinancial specialized entities that manage intellectual property rights, research and development, trade, and other activities.
- Analytical need:
  - Growing demand exists to separately identify SPEs within ESS to improve the analytical value of cross-border statistics because SPE activities often have no or limited direct impact on the domestic (host) economy.
  - Separate identification helps users (including market analysts and policymakers) to better:
    - assess the economic impact of cross-border financial flows and positions on the domestic economy;
    - understand activities of MNEs;
    - identify cross-border vulnerabilities;
    - gauge data quality and coverage.
- Implementation note:
  - Separate identification of SPEs has been a priority for the Committee since 2016; the Committee set up the Task Force on SPEs (TFSPE) which recommended stronger IMF involvement in improving SPE coverage within ESS.

### Defining SPEs — internationally agreed definition and guidance
- Background:
  - Existing manuals provide a starting point but no internationally agreed standard definition of SPEs; diverse SPE features and differing legal definitions across jurisdictions complicate comparability.
  - An internationally agreed definition of SPEs was endorsed by the Committee at its October 2018 meeting as proposed by the TFSPE to facilitate collection of separately identifiable cross-border statistics on SPEs.
  - The update of BPM6 is expected to incorporate these developments.
- Agreed definition of an SPE (in the context of ESS) — verbatim:
  - "An SPE, resident in an economy, is a formally registered and/or incorporated legal entity recognized as an institutional unit, with no or little employment up to a maximum of five employees, no or little physical presence and no or little physical production in the host economy.
  SPEs are directly or indirectly controlled by nonresidents.
  SPEs are established to obtain specific advantages provided by the host jurisdiction with an objective to (1) grant its owner(s) access to capital markets or sophisticated financial services; and/or (2) isolate owner(s) from financial risks; and/or (3) reduce regulatory and tax burden; and/or (iv) safeguard confidentiality of their transactions and owner(s).
  SPEs transact almost entirely with nonresidents and a large part of their financial balance sheet typically consists of cross-border claims and liabilities."
- Accompanying implementation tools:
  - A decision tree (flow chart, Figure 1) to guide national compilers in identifying resident SPEs.
  - A typology to delineate different SPE types and determine appropriate institutional sector (Annex 1).
  - Detailed illustrative summary cards for main SPE types are provided in Annex 2.
- Scope clarification:
  - The SPE definition in the ESS context is explicitly attributed to SPEs directly or indirectly controlled by nonresidents and does not explicitly cover domestic-to-domestic SPE relationships (for economies that provide tax-friendly environments within an economic territory).

### Data collection and reporting emphasis
- The Guidelines present a proposed data collection framework targeting selected balance of payments and international investment position components to compile separate statistics on resident SPEs; these components are explained in the Guidelines.
- National compilers should adapt data sources and compilation methods to national circumstances, considering practical and legal constraints.
- The Guidelines are not a stand-alone document; users should be familiar with BPM6 and the BPM6 Compilation Guide.

### Acknowledgments and contributors
- Preparation led by IMF Statistics Department (STA) under overall leadership of STA Deputy Director Mr. Gabriel Quirós-Romero.
- Primary drafter: Ms. Padma S. Hurree Gobin (Senior Economist, Balance of Payments Division, STA).
- Work supervised by Mr. Artak Harutyunyan (Deputy Chief, Balance of Payments Division, and later Advisor (as from October 2020), STA) under general direction of Mr. Carlos Sánchez-Muñoz (Assistant Director and Division Chief, Balance of Payments Division, STA).
- Production support: Ms. Fadhila Alfaraj (Special Appointee, Balance of Payments Division, STA) and Ms. Tatiana Carandang (Staff Assistant, Balance of Payments Division, STA).
- Comment contributions within the Balance of Payments Division by: Ms. Emma Angulo, Ms. Evrim Bese-Goksu, Mr. Theodore Bikoi, Mr. Kenneth Egesa, Mr. Thomas Elkjaer, Mr. Venkateswarlu Josyula, Ms. Silvia Matei, Ms. Rita Mesias, and Ms. Tamara Razin (all Senior Economists).
- Additional STA divisions contributing comments: Financial Institutions Division (Ms. Alicia Hierro); Government Finance Division (Mr. David Bailey, Mr. Noriaki Kinoshita, Mr. Philip Stokoe, Mr. Tobias Wickens); Real Sector Division (Mr. Robert Dippelsman, Ms. Jennifer Ribarsky); Strategy, Standards, and Review Division (Mr. Michael Stanger).
- Contributions from other IMF departments and external experts acknowledged, including Mr. Ruud de Mooij, Ms. Dinar Prihardini, Ms. Antje Pflugbeil, Mr. Gian Maria Milesi Ferretti, and representatives from ECB, OECD, and several national authorities and central banks.

*Preface, Introduction, and Defining SPEs sections of tnmea2022006 — Special Purpose Entities: Guidelines for a Data Template (Technical Notes and Manuals 22/06 | 2022).*

### 2. Each card includes a description, general characteristics, and a prototype balance sheet with the

### tnmea2022006 - 2. Each card includes a description, general characteristics, and a prototype balance sheet with the

### Decision tree for identifying resident SPEs
- Identification follows a decision tree using successive questions and flexible sequencing where warranted by country circumstances.
- Sequential decision points (see figure logic):
  - Is the entity formally registered and/or an incorporated resident institutional unit?
  - Is the institutional unit directly or indirectly controlled by nonresident(s)?
  - Has the institutional unit been established with one or more of the four objectives in the definition?
  - Does the institutional unit satisfy the criteria of having no or up to five employees?
  - Does the institutional unit transact almost entirely with nonresidents?
- Outcomes indicated:
  - The entity is an SPE
  - Not an SPE
  - Nonresident unit
- The decision tree underscores consistency with BPM6 concepts of “residence,” “institutional unit,” and “control.”

### Residence (A)
- Residence is determined by the economic territory with which the institutional unit has the strongest connection, expressed as its center of predominant economic interest.
- Each institutional unit is a resident of one and only one economic territory.
- For entities with little or no physical presence (SPEs), residence is determined by place of incorporation (BPM6, paragraph 4.115d) or registration (legally constituted or legally domiciled), consistent with 2008 SNA paragraph 4.56.
- Residence is not based on nationality or legal criteria used for exchange controls, tax, or other purposes; it follows BPM6 and 2008 SNA standards.
- BPM6 paragraph 4.135: incorporation and registration represent a substantial degree of connection to the economy.
- Residence is critical to statistical treatment; SPEs controlled by nonresidents that are legally independent are treated as separate institutional units and residents of their territory of incorporation.
- SPEs owned and directly controlled by residents in the same economy typically would not meet the statistical definition of an institutional unit and would be consolidated with resident owners; compilers are encouraged, where possible, to separately identify SPE-related cross-border transactions even if consolidation applies.

### Institutional Unit (B)
- Definition: an economic entity capable of owning assets, incurring liabilities, engaging in economic activities and transactions; autonomy of decision is required.
- Concept is the same in BPM6 and 2008 SNA.
- Special treatment: SPEs that cannot act independently of their parent should in principle be regarded as part of the parent and consolidated, except when resident in a different economy than the parent (2008 SNA paragraph 4.61).
- Legal independence to hold assets and liabilities and autonomous behavior do not always coincide; 2008 SNA paragraph 2.16 recognizes SPEs implicitly as responsible and accountable for decisions and actions.

### Direct or Indirect Control by Nonresidents (C)
- Control may be achieved directly by owning equity giving voting power or indirectly via control through a chain of ownership.
- For SPEs, the focus is on control: an SPE should be directly or indirectly controlled by nonresidents.
- Control is determined to exist if the direct investor owns more than 50 percent of the voting power in the DI enterprise either directly or indirectly through a chain of DI relationships.
- Examples and numeric illustrations:
  - Indirect control can continue through a series of companies as long as control exists at each stage.
  - A chain with each link involving 60 percent voting power results in indirect equity of 36 percent at the second level (60 percent of 60 percent), 21.6 percent at the third level (60 percent of 36 percent), and so on.
- Framework for Direct Investment Relationships (FDIR) rules: control can be passed down a chain of ownership as long as control exists at each stage or when the investor and its subsidiaries combined own more than 50 percent of the voting power.
- Immediate DI transmission criterion: 10 percent or more of voting power applies to immediate direct investment (FDIR context).
- Practical sources for determining direct/indirect control:
  - Business registers with information on entities with nonresident participation (subject to adequacy refinement for SPEs).
  - Regulatory institutions licensing SPEs, which may record shareholding structures.
  - Local enterprise group surveys (may complicate identification for units in larger local enterprise groups).

### Objectives for Establishing SPEs (D)
- SPEs are established to obtain specific advantages provided by the host jurisdiction; the “special purpose” is central.
- Compilers should document legal provisions for SPEs offered by their countries rather than relying solely on entity responses.
- Typical attractive features:
  - Tax advantages: relatively generous participation exemption regimes and low withholding tax (WHT) rates on dividends, interest, and royalties.
  - Bilateral tax treaties (BTTs) that typically lower WHT rates on a reciprocal basis.
  - Preferential treatment of income from intellectual property in some jurisdictions.
  - Non-tax factors: well-developed international financial center (IFC) ecosystem, access to capital markets, sophisticated financial services, skilled multilingual workforce, stable political and social climate.
- Third-party indicators (TPIs) may complement compilers’ knowledge but require judgment due to differing methodologies, opacity, and quality issues.
- Distinction in practice (historical):
  - Offshore financial centers (OFCs): usually small jurisdictions, stylized cross-border financial activity, low or zero corporate taxes.
  - International financial centers (IFCs): well-developed financial markets and infrastructure, attract routing of investments; terms OFC and IFC are now used somewhat interchangeably.
- Examples of countries considered IFCs in the past: Ireland, Japan, The Netherlands, United Kingdom (note: text lists these as examples).

### Five-Employee Threshold (E)
- Definition requires SPEs should have zero or up to a maximum of five employees.
- Rationale:
  - In principle SPEs are considered to have no employment; a cut-off rule of five employees was established for practical applicability and to reflect reduced physical presence.
  - Consultation in 2018 indicated some jurisdictions may require minimum employment causing entities to “artificially” employ staff; entities above five employees are not considered SPEs.
- The five-employee threshold distinguishes “near-SPEs” (SPE-like but with more than five employees).
- Near-SPEs may display disproportionately large revenue/balance sheet size per employee; emergence influenced by OECD Base Erosion Profit Shifting (BEPS) initiative.
- Irrespective of type of employment, and whether employed directly under payroll or indirectly via employment agency services, the up-to-five rule applies.

### No or Little Physical Presence (F)
- SPEs should have no or little physical presence and no or little physical production; no specific numerical threshold is recommended.
- Physical production uses inputs such as employees, physical capital, goods and services to produce outputs delivered to other institutional units.
- Little physical presence implies absence of significant physical assets (buildings, land, machinery and equipment, sub-soil assets) in the economic territory of incorporation.
- Typical minimal physical presence: physical address, electronic communication addresses, and possibly small-scale premises if legally required.
- Nonfinancial assets of an SPE are typically restricted to intangible or mobile tangible assets.
- Indicators to determine little or no physical presence:
  - Computation of several ratios, e.g., material fixed assets, trade receivables, and turnover to total assets, to measure domestic links.
  - Zero or a minimum turnover with domestic parties in the host economy.
  - A minimum cap on the gross book value of property, plant, and equipment.
- Any additional approaches adopted by national compilers for precision should be in addition to (not instead of) the employment criterion of up to five employees.

### Nonresident Share of Total Balance Sheet Criterion (G)
- The SPE definition suggests a large part of an SPE’s financial balance sheet typically consists of cross-border assets and liabilities, and most transactions are carried out with nonresidents.
- This criterion is mainly applicable in pass-through direct investment (DI) where identification is straightforward.
- Financial SPEs almost exclusively hold financial assets and liabilities.
- Nonfinancial SPEs may hold intellectual property rights and collect fees/royalties, engage in merchanting, or captive operational leasing.
- If such SPEs mainly collect royalties or fees from residents, they should not be treated as SPEs because of close links to the domestic economy.

*Source: tnmea2022006 - 2. Each card includes a description, general characteristics, and a prototype balance sheet with the*

### Annex 1 provides a typology of SPEs, which aims to delineate the different types of SPEs based

### tnmea2022006 - Annex 1 provides a typology of SPEs, which aims to delineate the different types of SPEs based

### Typology, residency, and classification issues
- Annex 1 delineates different types of SPEs based on their economic functions and relates them to the appropriate institutional sector following the 2008 SNA.
- Portfolio and other investment assets and liabilities can be vis à vis many market participants that may be resident in the host economy for many types of SPEs.
- For SPEs owned by residents but indirectly controlled by nonresidents (examples in Figure 4 (Case 5)), equity on the liabilities side is held by residents, yet these entities may still have large cross-border assets and liabilities.
- Resident chains of entities (Figure 5) require compilers to assess whether assets in resident entities (for example, those of Y in X) are relevant to the domestic economy; if not, and if they meet the SPE definition including having large cross-border assets and liabilities, they would be considered SPEs.
- Classification of a resident enterprise directly owned by a nonresident (example Y) depends on the composition of its balance sheet (foreign and domestic assets), and whether the balance sheet is relevant to the domestic economy.
- Compilers are expected to look at the relevance of the balance sheet; an entity can be resident but have no economic links with the domestic economy.

### Specific types of SPEs — Securitization vehicles
- Securitization vehicles are entities set up to provide structured finance and, if they meet all SPE characteristics, should be classified as SPEs even when balance sheets are composed of foreign assets and a mix of foreign and domestic liabilities.
- Securitization: raising funds by selling a security backed by specific assets or income streams; conversion of existing assets or future cash flows into marketable securities by placing those assets in a structure where the risks and rewards of owning the assets are transferred to a third party (BPM6 paragraph 4.78, and the Handbook on Securities Statistics).
- Elements of securitization (Figure 6):
  - (1) assets generating the cash flow that are to be securitized (underlying asset),
  - (2) the SPE functioning as the conduit linking the underlying assets and investors,
  - (3) investors investing in the cash flows (securities) generated by the underlying asset, usually grouped in tranches and sold.
- In the ESS context, most involved flows for securitization are cross-border; balance sheets can be a mix of cross-border and domestic investors.
- If a securitization vehicle (registered trust or incorporated company) meets the SPE definition (no employees, directly or indirectly controlled by a nonresident, and has a large share of its balance sheet with nonresidents), compilers should include it in the SPE population.
- Functional classification of cross-border assets and liabilities for securitization vehicles can vary between DI, other investment, and portfolio investment.
- Cases to distinguish (BPM6 paragraph 4.78):
  - Originator issues asset-backed securities on its own books (securitization may occur without creation of a separate entity).
  - When the portfolio is not transformed, or the vehicle does not bear market or credit risks, it can be combined with its parent (if resident in the same economy) or treated as a captive intermediary (if in a different economy to that of its parent).
- Orphan securitization vehicles:
  - Created independent from their parents, with no relationship to the originator; originator holds no share capital and control is absent.
  - Often called “orphan” SPEs with shares settled on a charitable trust and professional directors provided by an administration company.
  - These have no employees but have a manager who liaises among originator, investors, lenders, and other parties.
  - Orphan vehicles with autonomy of decision are institutional units “on their own right” and, based on current SPE definition, would not be SPEs in the host economy as they do not have direct or indirect nonresident control.
- Compilers should exercise caution and be attentive to the securitization vehicle framework and inconsistent terminology (sponsor, originator, administrator) when defining SPE samples.

### Specific types of SPEs — Investment funds (IFs) and other SPEs
- Non-money market investment funds (IFs):
  - Collective investment schemes that raise funds by issuing shares or units to the public (BPM6 paragraph 4.74).
  - Proceeds invested predominantly in long term financial assets and nonfinancial assets (usually real estate).
  - IFs can include mutual funds, exchange-traded funds and hedge funds, which can be open-ended or closed-ended.
  - IFs do not meet the SPE definition and should not be considered SPEs; BPM6 mentions IFs may be direct investors and/or DI enterprises (BPM6, paragraph 6.30).
  - IFs that could be treated as SPEs: technically created as a subsidiary of a parent with the view to be financially independent and formed with a clear and limited scope to fund specific assets in a single portfolio.
- Other SPE types and activities:
  - SPEs may carry out non-“pass-through” financial activities and own nonfinancial assets, including intellectual property rights, real estate holding, and succession planning structures.
  - Activities include holding intellectual property rights and collecting fees/royalties, operational leasing, re-invoicing, consultancy services, employment services, information and communication technologies, logistics and/or marketing, shipping and shipping management, and in some cases trade in goods.
  - SPEs incorporated to have legal ownership of intellectual property rights or conduct ancillary activities are included in the SPE typology and decision tree and should be recognized by compilers.
- Government-controlled SPEs:
  - SPEs resident in another territory can be created by government units for fiscal purposes (BPM6, paragraphs 8.24–8.26).
  - Such entities are resident in their economy of incorporation or registration, not in the economy of their owner.
  - A government-controlled SPE used for fiscal purposes is likely to serve fiscal objectives and should be covered in SPE data reporting as category 5.1 in Annex 1.

### SPE data collection practices — institutional arrangements and challenges
- Scope:
  - This section provides guidance on familiarizing agencies, centralizing and organizing information, and liaising with data-collecting agencies. Annex 3 presents snapshot of current practices for selected countries.
  - Data collection frequency among countries varies from monthly or quarterly to annual.
- Collaboration between regulatory bodies and the ESS compiling agency:
  - Each host economy has its regime to license/regulate SPEs with specific agencies and protocols for available data.
  - In many countries compiling cross-border data on SPE activities, data collection is part of the general balance of payments data collection framework; confidentiality concerns require legal arrangements and memorandums of understanding (MOUs).
- For countries without a systematic process:
  - Designate a lead agency, an inter-institutional working group, or a coordination mechanism; the ESS compiling institution is often useful as lead.
  - Legal arrangements (statistical law, inter-agency protocol, executive decree, supranational legislation) assigning responsibility and authority facilitate collection and processing.
  - High-level endorsement supports effective collaboration.
- Challenges to address:
  - a. Multiple stakeholders: FIUs, LEAs, regulators, policymakers, private sector — need shared understanding of rationale and importance of macroeconomic statistics.
  - b. Definitional issues: lack of clear and nationally/internationally accepted definitions; residence concept differences between macroeconomic and fiscal statistics — lead agency should explicitly provide exact definitions.
  - c. Incompatible data: different collection systems and methods across agencies complicate consolidation; need for consistent presentation and harmonization where possible.
- Operational recommendations:
  - Lead agency should proactively contact stakeholders and explain purpose, rationale, equality of participation, and that cooperation will not undermine existing agency capacities.
  - Designate contact points in each institution responsible for timely provision, aggregation, avoiding double counting, and including notes/explanations.
  - MOUs facilitate data sharing while preserving confidentiality.

### Determining data needs and data collection process
- Lead agency tasks:
  - Identify required data types, existing templates/matrices, and clarify statistical definitions and terms.
  - Establish timelines, procedures, and templates; issue clear guidance and detailed instructions.
- Data submission responsibilities:
  - Contact points provide raw data, aggregate information, ensure no double counting, include explanatory notes, and supply clarifications for mutual evaluations.
- Survey practices and linkage to existing sources:
  - Dedicated surveys are used in almost all countries; components do not solely pertain to DI statistics (see BPM6 Compilation Guide, Chapter 2).
  - Link SPE data collection to business registers and administrative data to enable cost savings and better sampling frames.
  - Possibility of undercoverage depends on selection variables and reporting thresholds; SPEs are often small in employment/infrastructure but large in financial assets.
  - Sample selection could be stratified by type of activity to cover significant representatives.
- Country examples and practical choices:
  - Mauritius example: authorities used a sample survey (not a census); survey frame included twelve resident management companies that administered 70 percent of the SPEs’ total assets and management companies reported cross-border data on 75 percent of the total balance sheet of SPEs they administered; results were grossed up despite challenges in grossing up.
  - Some countries collect data by local enterprise group, which complicates identification of SPEs within larger groups and can underestimate SPE share in DI statistics.
  - Creating SPE registers in host economies supports data collection; keeping registers up to date critical for timely identification of major new players — approach adopted by Mauritius and Seychelles.
- LEI enhancements:
  - Enhancements of data collected within the Legal Entity Identifier (LEI) framework, including information on direct and ultimate parents, may support register construction.
  - LEI usefulness depends on being “readily available”; ISIN is cited as an analogous instance for portfolio instruments.
  - The LEI remains a promising tool for linking financial entities nationally and internationally.

### Data reporting template — scope and key components
- Purpose:
  - Reporting template designed in consultation with international organizations and country authorities and endorsed by the Committee in October 2018.
  - Template aims to provide internationally comparable, separately identified SPE-related cross-border statistics.
- Design:
  - Collects cross-border data for SPEs for a reduced number of balance of payments and IIP components, built on cross-border flows (balance of payments transactions) and cross-border positions (IIP).
  - Template uses same lines as BPM6 standard reporting templates and targets selected components relevant for SPEs for both transactions and positions.
  - Two levels of data reporting allowed: a minimum (yellow-colored cells) versus an encouraged set (blue-colored cells).
- Financial account (Table 1) highlights:
  - Activities of SPEs extend beyond DI; detailed information regarding DI equity and debt instruments included as a minimum requirement.
  - DI lines split by DI investor direction: direct investor in DI enterprise (DIE), reverse investment, and (where relevant) between fellow enterprises with sub-classification by whether ultimate controlling parent is resident, nonresident, or unknown.
  - Portfolio investment included with split between equity and debt securities; defined as cross-border transactions and positions involving debt or equity securities other than DI or reserve assets (BPM6, paragraphs 6.54–6.58).
  - Minimum detail by instrument in portfolio investment requested; maturity breakdown for debt securities requested as encouraged components.
  - Other investment included only as a total (minimum), with short- and long-term breakdown as encouraged components; financial derivatives separately identified.
- Capital and current account (Table 2) highlights:
  - Capital account separately identifies gross acquisitions/disposals of non-produced nonfinancial assets (relevant for SPEs owning intellectual property rights): (a) natural resources; (b) contracts, leases, and licenses; (c) marketing assets (and goodwill) (BPM6, paragraphs 13.9–13.21).
  - Current account includes goods related to SPEs with a separate line for net merchanting by resident SPEs (merchanting defined in BPM6 paragraphs 10.41–10.49).
  - Four distinct services components relevant for SPEs included:
    - a. transport (BPM6, paragraphs 10.74–10.81),
    - b. financial services (BPM6, paragraphs 10.118–10.136),
    - c. charges for the use of intellectual property n.i.e (BPM6, paragraphs 10.137–10.140),
    - d. other business services (BPM6, paragraphs 10.147–10.160).
  - Primary income (investment income) related to SPEs included to link to financial account stocks; investment income components related to DI requested for minimum reporting, remaining components encouraged (BPM6, paragraphs 11.24–11.73).
  - Secondary income (current transfers) related to SPEs included; current taxes on income, wealth, capital gains, and taxes on financial transactions recorded where applicable (BPM6, Chapter 12).
- Template structure (Table 1 and Table 2):
  - Financial account components split into Flows during the current year 20XX and Position as at end of current year 20XX for Assets and Liabilities, with defined items for DI, Portfolio investment, Other investment, and Financial derivatives related to SPEs.
  - Capital and current account components presented as Flows during the current year with specified lines for gross acquisitions/disposals of non-produced nonfinancial assets, goods (including merchanting), services (transport, financial services, charges for use of intellectual property, other business services), primary income disaggregated by DI/portfolio/other investment income related to SPEs, and secondary income.

*Technical Notes and Manuals 22/06 | 2022 — Annex 1 and related sections on SPE typology, data collection practices, and the SPE reporting template.*

### ANNEX 1  TYPOLOGY OF SPES FOR EXTERNAL SECTOR

### ANNEX 1  TYPOLOGY OF SPES FOR EXTERNAL SECTOR STATISTICS

### Category I: Corporate Groups’ Captive Financial Entities
- Description: Those captive entities created by a financial or nonfinancial nonresident corporate to fulfil specific financial activities, other than insurance, for the sponsor.
- Types:
  - 1.1 Conduits
    - Function: Raising or borrowing funds, often from unrelated enterprises, and remitting those funds to its parent or to another related enterprise. Typically, do not transact on the open markets on the asset side.
    - References: Para 4.59, Para 4.51, Para 4.86
    - Institutional sector: S127
  - 1.2 Holding companies
    - Function: Owning a controlling level of equity in subsidiaries, without actively directing them (Passive holding corporations)
    - References: Para 4.59, Para 4.51, Para 4.84
    - Institutional sector: S127
  - 1.3 Holding financial assets for securitization
    - Reference: Para 4.51
    - Institutional sector: S127
  - 1.4 Intra group lending companies
    - Function: Loan funding from and to intra group companies; Entities taking and granting inter-company loans
    - Reference: Para 4.51
    - Institutional sector: S127
  - 1.5 Captive factoring and invoicing companies
    - Function: Concentrating sales claims and invoicing sales.
    - Institutional sector: S127
  - 1.6 Captive financial leasing companies
    - Function: Engaging in lease-in lease-out agreements or as a financial intermediary in a chain of vehicles in which the end vehicle is involved in the leasing of equipment or fixed assets.
    - Reference: Para 4.83
    - Institutional sector: S127
  - 1.7 Other captive financial companies
    - Function: Dealing with financial needs of a group, such as financing particular projects and loan origination.
    - Reference: Para 4.87
    - Institutional sector: S127

### Category II: Specialized Financial Entities
- Description: These financial entities, with a degree of operational autonomy, have been specially created to isolate the risks of the parent companies to structure financial transactions for or securitize assets of the parents.
- Types:
  - 2.1 Captive insurance companies
    - Function: Providing insurance to group enterprises.
    - Reference: Para 4.88
    - Institutional sector: S128
  - 2.2 Securitization vehicles/Financial vehicle corporations
    - Function: Carrying out securitization transactions in order to isolate the payment obligations of the undertaking from those of the originator, or the insurance or reinsurance undertaking (in the case of insurance-linked securitizations). Repackaging.
    - References: Para 4.59, Para 4.51, Para 4.77
    - Institutional sector: S125
  - 2.3 Holding financial and nonfinancial assets (including real estate) for related companies
    - Function: Holding financial and nonfinancial assets of related companies with the goal of capital appreciation, interest/dividend income, and other income.
    - Institutional sectors: S11 and S125
  - 2.4 Companies carrying out other financial functions
    - Function: Performing factoring, invoicing on open markets, financial leasing on open markets, and other financial assets management.
    - References: Para 4.51, Para 4.76
    - Institutional sector: S125

### Category III: Corporate Groups’ Nonfinancial Entities
- Description: Those SPEs created by a financial or nonfinancial nonresident entity to fulfil specific nonfinancial activities.
- Types:
  - 3.1 Ancillary companies
    - Function: Registered or incorporated companies providing ancillary services that are not resident in the same economy as its parent.
    - References: Para 4.51
    - Institutional sector: S11
  - 3.2 Operational leasing companies
    - Function: Holding fixed assets, such as planes, vessels, and machinery, for the purpose of leasing them out.
    - Institutional sector: S11
  - 3.3 Merchanting companies
    - Function: Purchasing goods from a nonresident and re-selling the goods to another nonresident (merchanting companies have ownership of the goods traded).
    - Institutional sector: S11
  - 3.4 Royalty and licensing companies
    - Function: Concentrating group receipts concerning royalties and similar flows received from intellectual property rights and trademarks. Such a company of an SPE-type receiving royalties or similar flows for a group of enterprises or individuals is regarded as an independent royalty and licensing company.
    - Institutional sector: S11
  - 3.5 Legal ownership of intangible assets
    - Function: Holding intangible assets for a related company or group of companies.
    - Institutional sector: S11

### Category IV: Wealth management entities
- Description: Those SPEs created by household entities or groups of individuals to hold or manage wealth or real estates for their owners.
- Type:
  - 4.1 Companies holding/managing wealth and real estate for individuals and families
    - Function: Managing family trust funds, foundations, personal holding companies.
    - References: Para 4.59, Para 4.51
    - Institutional sectors: S11 and S127

### Category V: Government Owned Financial Entities
- Description: Those SPEs created by governments for fiscal activities.
- Type:
  - 5.1 SPEs owned by governments for fiscal purposes
    - Function: Raising or borrowing funds on behalf of a nonresident general government.
    - Reference: Para 8.24
    - Institutional sector: S11, S12, or S15

### Category VI: Other structures
- Description: Those SPEs created to conduct any type of transactions other than those covered in the other categories.

### Note on classification
- Footnote: The types listed may be SPEs, but not all entities of the types listed are necessarily SPEs. The definition and the decision tree should assist compilers in determining which entities are SPEs.

### Illustrative Summary Cards (Selected types 1–12)
- General presentation: Each card provides Description/Function, General Characteristics (Institutional Sector, Activity Code, Can have resident parent?, Can have production?, FDI Pass through investment), Prototype Balance Sheet (assets/liabilities entries), and an Example diagram.

- 1. Conduit
  - Description/Function: Raising or borrowing funds from unrelated enterprises or open market and remitting those funds to its parent or to other related enterprises. According to 2008 SNA, para 4.114 c, conduits should be classified in S.127 (captive financial institutions) if they qualify as institutional units and raise funds in open markets to be used by their parent corporation. Conduits typically do not transact on the open markets on the asset side.
  - Synonym: External financing
  - Institutional Sector: S127 - Captive financial institutions and money lenders
  - Activity Code: ISIC Section K 6499
  - Can have resident parent?: NO
  - Can have production?: NO
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment: Direct (Foreign) Investment; Equity; Debt; Portfolio Investment: Portfolio Investment Equity Debt; Other Investment: Other Investment Currency & Deposits Loans Loans

- 2. Holding Corporation
  - Description/Function: Holding the assets (owning controlling level of equity) of subsidiary corporations (ENT) on behalf of its parent without undertaking any management activities. Passive holdings would be merged with the direct parent entity, unless the parent is nonresident.
  - Institutional Sector: S127 - Captive financial institutions and money lenders
  - Activity Code: ISIC Section K 6420
  - Can have resident parent?: NO
  - Can have production?: NO
  - FDI Pass through investment: YES
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment: Portfolio Investment Equity Debt; Other Investment: Other Investment Loans Loans

- 3. Intragroup Lending
  - Description/Function: Lending from and to related companies. Covers all debt instruments.
  - Institutional Sector: S127 - Captive financial institutions and money lenders
  - Activity Code: ISIC Section K 6420
  - Can have resident parent?: NO
  - Can have production?: NO
  - FDI Pass through investment: YES
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment: Portfolio Investment Equity Debt; Other Investment: Other Investment Currency & Deposits Loans Loans

- 4. Captive Factoring and Invoicing
  - Description/Function: Concentrating sales claims. It involves the sale of sales claims (sales of account receivables) to a company called the factor. An SPE-type of entity providing factoring and invoicing services within a group is classified as captive financial institutions (S127). If the unit deals with counterparties on the open markets, it should be rather classified under (S125).
  - Institutional Sector: S.125 - Other Financial Institutions; S.127 - Captive Financial Institutions
  - Can have resident parent?: NO
  - Can have production?: NO
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: Ye s; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 5. Captive Financial Leasing
  - Description/Function: Engaged in lease-in lease-out agreements, or as a financial intermediary in a chain of vehicles in which the end vehicle is involved in the leasing of equipment or fixed asset. The Lessee is considered to have ownership of the asset.
  - Institutional Sector: S.127 - Captive Financial Institutions
  - Activity Code: ISIC Section K 6491
  - Can have resident parent?: NO
  - Can have production?: YES
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 6. Loan Origination
  - Description/Function: Funding obtained from the parent or from related enterprises and furthered to external entities (companies). The entity is classified as S.127, Captive Financial Institution. The entity may be linked to S124 investment funds, where it is considered that the entity is a separate institutional unit. (Example LU)
  - Institutional Sector: S127 - Captive financial institutions and money lenders
  - Activity Code: ISIC Section K64
  - Can have resident parent?: YES/NO
  - Can have production?: NO
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Currency & Deposits Loans Loans

- 7. Captive Insurance Corporation
  - Description/Function: Providing insurance to group enterprises. According to 2008 SNA, para 4.115, captive insurance, which serves only its Owners, is to be classified as part of insurance corporations.
  - Institutional Sector: S.128 – Insurance Corporations
  - Activity Code: ISIC Section K 65.1, K65.2, K 65.3
  - Can have resident parent?: NO
  - Can have production?: YES
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: No; Direct (Foreign) Investment; Equity; Debt; F61; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits; Insurance reserves

- 8. Securitization Vehicles/Financial Vehicle Corporations (FVC)
  - Description/Function: FVC carry out securitisation transactions and its structure are intended to isolate the payment obligations of the undertaking from those of the originator, or the insurance or reinsurance undertaking (in the case of insurance-linked securitisations); It issues debt securities, other debt instruments, securitisation fund units, and/or financial derivatives and/or legally or economically owns assets underlying the issue of these financing instruments that are offered for sale to the public or sold on the basis of private placements. Repackaging (securitization of securities) are a sub-group group of this category.
  - Institutional Sector: S.125 – Other Financial Institutions; S.127 – Captive Financial Institutions
  - Activity Code: ISIC Section 6499
  - Can have resident parent?: YES
  - Can have production?: NO
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 9. Operational Leasing Companies
  - Description/Function: Hold fixed assets, such as plane and machinery, for the purpose of leasing them out. Operational leasing company should be classified as non-financial corporations (S11). (Including mobile equipment renting company)
  - Institutional Sector: S.11 – Non – financial enterprises
  - Activity Code: ISIC Section N 7730
  - Can have resident parent?: NO
  - Can have production?: YES
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: YES; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 10. Merchanting
  - Description/Function: Purchasing goods from nonresidents and re-selling the goods to nonresidents. A defining feature is that merchanting companies own the goods traded.
  - Institutional Sector: S.11 - Non-financial corporations
  - Activity Code: ISIC Section G 4600
  - Can have resident parent?: NO
  - Can have production?: YES
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: Ye s; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 11. Royalty and Licensing
  - Description/Function: Concentrating group receipts concerning royalties and similar flows received from intellectual property rights and trademarks. An SPE-type of entity holding intellectual property rights or trademarks and receiving royalties or similar flows for a group of enterprises or individuals is regarded as an independent royalty and licensing company. The issue of economic ownership of the relevant non-financial assets needs further discussion.
  - Institutional Sector: S.11 - Non-financial corporations
  - Can have resident parent?: YES
  - Can have production?: YES
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: Ye s; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits

- 12. Companies Established to Manage Personal and Family Wealth
  - Description/Function: Entities registered or incorporated to manage personal wealth. (individual or family wealth management). This would encompass foundations, limited liability companies etc. Trusts are treated as quasi corporations. According to the 2008 SNA, family trusts are to be treated as captive financial institutions (S127).
  - Institutional Sector: S.127
  - Activity Code: ISIC Section K 6430
  - Can have resident parent?: YES
  - Can have production?: NO
  - FDI Pass through investment: NO
  - Prototype Balance Sheet (selected line items): Non-Financial Assets: YES; Direct (Foreign) Investment; Equity; Debt; Portfolio Investment; Other Investment; Loans Loans; Currency and Deposits
  - Footnote: However, if a trust deals with individuals and families on the open market, it should be classified under the appropriate financial subsector, for example, as Non-MMF investment funds (S124). Incorporated legal entities are recognized as institutional units in their own right when they are owned by a household.

*Technical Notes and Manuals 22/06  |  2022 — ANNEX 1 TYPOLOGY OF SPES FOR EXTERNAL SECTOR STATISTICS*

### 13. Special Purpose Units of General Government

### 13. Special Purpose Units of General Government

### Description/Function
- Government entity raising or borrowing funds on behalf of general government. Requires nonresident parent.
- According to paragraph 8.25 of BPM6, a special approach for government entities of this kind is to be used due to the fact that the nonresident entity undertakes functions at the behest of general government for public policy, not commercial purposes.
- Accounting treatment:
  - At the time of borrowing: a transaction creating a debt liability of the government to the borrowing entity is imputed equal to the amount of the borrowing.
  - The corresponding entry at the time of borrowing is an increase in the government’s equity in the borrowing entity.
  - At the time funds (or resources acquired with the funds) are passed to the government (as applicable): the flow of funds is shown as a transaction, matched by a reduction of the government’s equity in the borrowing entity by the same amount.

### General Characteristics
- Institutional Sector: S127
- Activity Code: K
- Can have resident parent? NO
- Can have production? NO
- FDI Pass through investment: NO

### Prototype Balance Sheet
- Assets
  - Non-Financial Assets
  - Direct (Foreign) Investment
    - Equity
    - Debt
  - Portfolio Investment
    - Equity
    - Debt
  - Other Investment
    - Loans
    - Currency and Deposits
- Liabilities
  - Direct (Foreign) Investment
    - Equity
    - Debt
  - Portfolio Investment
    - Equity
    - Debt
  - Other Investment
    - Loans
    - Currency and Deposits
- Note: Relevance of the instrument by colour intensity. Financial derivatives and other instruments non-highlighted are also possible.

### Illustrative Example (as presented)
- Entities and flows shown:
  - Sponsoring government
  - Gov. SPE
  - Re-routed debt
  - Debt securities
  - Equity
  - Bond holders

### Practices by Selected Member Countries (excerpted summaries)
- Hungary
  - SPEs are subsidiaries forming part of MNEs mostly active abroad, with only weak ties to the Hungarian economy; involved in intra-group intermediation of funds.
  - Monthly, quarterly, and annual questionnaires sent to a sample of entities.
  - MNB identifies SPEs within resident corporations in conjunction with the Hungarian Central Statistical Office (HCSO).
  - Identification indicators include:
    - The name of the enterprise refers to the offshore nature of the activity.
    - If SPE criteria are satisfied both for a resident enterprise and its resident subsidiary, the two enterprises together are an SPE.
    - Negligible non-financial asset ratio compared to financial assets.
    - Financial assets consist mainly of equity, long-term loans and securities.
    - Turnover derives primarily from export revenue and it does not exceed HUF 500 million annually.
    - High registered capital (capital reserve).
    - Number of staff tends to be very low (1–3 persons).
  - Cross-border SPEs separately identified: Yes
  - Balance of Payments/IIP components: The same level requested as for normal entities. Balance of Payments including SPEs.

- Luxembourg
  - MNEs set up SPEs in Luxembourg for inward and outward Direct Investment. Majority are Captive Financial Institutions; "pure SPEs" only incur liabilities and hold assets vis-à-vis other group entities.
  - Reporting to CBL:
    - Quarterly full balance sheet, without detail on security positions.
    - Quarterly report on derivatives and non-financial assets transactions (if any).
    - Monthly security by security report including information on counterpart country (first counterpart), currency and economic sector. Most reported securities are equities (or bonds to a lesser extent) without ISIN.
  - Accounting firms or providers of corporate services report on behalf of SPEs.
  - Resident SPEs spotted in the Statistical Business Register used for annual FDI statistics.
  - Assessment of SPEs employment is based on:
    1. Employment in the statistical business register,
    2. Non-zero staff cost in the profit & loss account; staff costs usually reflecting the compensation.
  - Cross-border SPEs separately identified: Yes
  - Balance of Payments/IIP components: Most related components. Aggregated balance sheet of financial vehicle corporations.

- Mauritius
  - SPEs involved in both financial and nonfinancial activities including aircraft financing and leasing; assets management; consultancy services; employment services; information and communication technologies; insurance; licensing and franchising; logistics and/or marketing; operational headquarters; pension funds; shipping and shipping management; trading; financial services; and other activities as may be approved by the regulator, the Financial Services Commission.
  - Annual sample survey.
  - Institutional collaboration between the central bank and the Financial Services Commission, which licenses the SPEs and supervise the Management companies. The MCs report on behalf of SPEs.
  - Two types of SPEs:
    - GBC1: companies conducting business outside Mauritius. They are tax residents, can employ residents, rent offices and have a bank account.
    - GBC2: companies conducting business exclusively outside Mauritius. They are not tax residents, cannot employ residents or rent offices.
  - Cross-border SPEs separately identified: Yes
  - Balance of Payments/IIP components: Most related components. Balance of Payments statistics; International Investment Position Statistics.

- Netherlands
  - SPEs/SFIs: Residents in which nonresidents participate or exercise influence and which aim at or are highly involved in holding foreign assets and liabilities; pass through of receipts from Intellectual Property Rights from foreign group companies; generating turnover mainly related to re-invoicing to and from foreign group companies.
  - Monthly reporting based on a stratified sample approach. Annual benchmark survey. Trust offices report on behalf of SPEs.
  - SPE definition translated into a decision tree, jointly developed by DNB and Statistics Netherlands. Criteria include:
    - Resident but ultimately controlled by nonresidents.
    - At least 90% of SFI’s foreign assets and liabilities.
    - Total turnover are revenues from export of royalties and licenses.
    - Securitization vehicle is originated by a foreign bank.
    - Domestic turnover of an SFI should not exceed EUR 25 million.
  - DNB maintains a separate business register for SFIs, which feeds the General Business Register to ensure consistency.
  - Cross-border SPEs separately identified: Yes
  - Balance of Payments/IIP components: Most related components. Balance of Payments including SFIs.

- Seychelles
  - Data collected on Companies Special License (CSL) used for investment management and advice, offshore banking, offshore insurance and re-insurance, investment services, holding, marketing, intellectual property and franchise, human resources, and international trading in goods and services.
  - Annual sample survey. International corporate service providers report on behalf of SPEs. CSLs requested to keep balance sheet records and provide annual financial statements to Financial Services Authority (FSA).
  - Regulatory and data-sharing arrangements:
    - FSA manages a separate company register for offshore activity.
    - Memorandum of Understanding on data sharing and confidentiality between CBS and FSA under which FSA coordinates a survey for cross-border statistics on CSLs on behalf of the Central Bank.
  - Cross-border SPEs separately identified: Yes
  - Balance of Payments/IIP components: Most related components. Balance of Payment including offshore.

### References (selected items listed in source)
- Bank for International Settlements (BIS). 2009. “Report on Special Purpose Entities.”
- European Central Bank, Eurostat, and OECD. 2013. “Final Report by the Task Force on Head Offices, Holding Companies and Special Purpose Entities (SPEs).”
- International Monetary Fund (IMF). 2009. Balance of Payments and International Investment Position Manual, sixth edition (BPM6).
- IMF Committee on Balance of Payments Statistics (BOPCOM). 2016a. “Compiling Data on Special Purpose Entities.” BOPCOM Paper No. 16/04.
- IMF Committee on Balance of Payments Statistics (BOPCOM). 2018. “Final Report of the Task Force on Special Purpose Entities.” BOPCOM Paper No. 18/05.

*Content derived from "13. Special Purpose Units of General Government" (tnmea2022006).*

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_Source: https://www.imf.org/-/media/files/publications/tnm/2022/english/tnmea2022006.pdf_