Title Page

TECHNICAL NOTES AND MANUALS

Special Purpose Entities

Guidelines for a Data Template to Collect Separate Information on Cross-Border Positions and Flows of Resident Special Purpose Entities

Copyright Page

©2022 International Monetary Fund

Special Purpose Entities: Guidelines for a Data Template

IMF Technical Notes and Manuals 2022/006

Approved by Mr. J. R. Rosales

Prepared under the overall guidance of Mr. Carlos Sánchez-Muñoz by a team in the IMF Statistics Department (STA), supervised by Mr. Artak Harutyunyan, and coordinated by Ms. Padma S. Hurree Gobin (main drafter), with contributions from Ms. Fadhila Alfaraj, and with administrative assistance provided by Ms. Tatiana Carandang. The note, which also draws from the Task Force Report on SPEs, benefited from comments by staff of the Fund's Statistics, Research and Fiscal Affairs Departments, as well as by international organizations and central bank officials.

View Table

Approved by Mr. J. R. Rosales

Prepared under the overall guidance of Mr. Carlos Sánchez-Muñoz by a team in the IMF Statistics Department (STA), supervised by Mr. Artak Harutyunyan, and coordinated by Ms. Padma S. Hurree Gobin (main drafter), with contributions from Ms. Fadhila Alfaraj, and with administrative assistance provided by Ms. Tatiana Carandang. The note, which also draws from the Task Force Report on SPEs, benefited from comments by staff of the Fund's Statistics, Research and Fiscal Affairs Departments, as well as by international organizations and central bank officials.

DISCLAIMER: This Technical Guidance Note should not be reported as representing the views of the IMF. The views expressed in this paper are those of the authors and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

ISBN:	979-8-40023-149-0 (Paper) 979-8-40023-261-9 (ePub) 979-8-40023-257-2 (PDF)
JEL Classification Numbers:	F23
Keywords:	globalization, multinationals, host jurisdictions, institutional units, control, cross-border flows and positions
Authors' email addresses:	phurreegobin@imf.org; aharutyunyan@imf.org; CSanchez-Munoz@imf.org

View Table

ISBN:	979-8-40023-149-0 (Paper) 979-8-40023-261-9 (ePub) 979-8-40023-257-2 (PDF)
JEL Classification Numbers:	F23
Keywords:	globalization, multinationals, host jurisdictions, institutional units, control, cross-border flows and positions
Authors' email addresses:	phurreegobin@imf.org; aharutyunyan@imf.org; CSanchez-Munoz@imf.org

Contents

• Preface

• Acronyms

• Introduction

• Defining SPEs

• Implementing the SPE Definition

  • A. Residence

  • B. Institutional Unit

  • C. Direct or Indirect Control of SPEs by Nonresidents: How to Apply It in Practice?

  • D. Objectives for Establishing SPEs

  • E. The Five-Employee Threshold Applied in the Definition

  • F. No or Little Physical Presence: How to Establish It in Practice?

  • G. Nonresident Share of Total Balance Sheet Criterion

  • H. Specific Types of SPEs

• SPE Data Collection Practices

  • A. Collaboration Between the Respective Regulatory Body and the ESS Compiling Agency

  • B. Data Collection Process

• Data Reporting

• Annexes

• Annex 1. Typology of SPEs for External Sector Statistics

• Annex 2. Illustrative Summary Cards for Each Type of SPEs in the Typology

• Annex 3. Current Practices Shared by Selected Member Countries

• References

• Figures

• Figure 1. Decision Tree to Identify SPEs for External Sector Statistics

• Figure 2. SPEs within Enterprise Groups

• Figure 3. Indirect Relationship

• Figure 4. Ownership and Control of SPEs

• Figure 5. Resident Chains of Entities

• Figure 6. Securitization and the SPE

• Tables

• Table 1. Financial Account Components [Flows and Positions Data]

• Table 2. Capital and Current Account Components [Flows Data]

Preface

The Special Purpose Entities: Guidelines for a Data Template (the Guidelines) have been 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) with a view to separately identifying their cross-border flows and positions within external sector statistics.

The Guidelines were prepared in close consultation with relevant stakeholders, including member countries and international and regional organizations. Several countries have been able to evaluate the SPE definition for cross-border statistics, considering the structures resident in their economies.¹ The results were shared and discussed collectively either through the European Central Bank (ECB) Working Group on External Statistics (WGES) or the Organisation for Economic Co-operation and Development (OECD) Working Group on International Investment Statistics (WGIIS). The Guidelines also benefited from inputs obtained through bilateral interactions with some SPE host jurisdictions and countries having experiences with SPEs. The outcomes of these assessments and discussions, combined with the work done earlier by the Task Force on SPEs (TFSPE) set up by the Committee, have served as important inputs into the drafting of the Guidelines.

The purpose of the Guidelines is to assist compilers in the practical application of the agreed definition to identify resident SPEs in their jurisdictions and in collecting and reporting SPE related cross-border data. To attain this objective, the Guidelines provide practical advice on the (1) implementation of the definition of SPEs, (2) possible data sources and processes for collecting and compiling SPE-related statistics, and (3) reporting within the agreed Data Template.

The key concepts such as residence, institutional unit, and control used in the Guidelines align with those of the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). Further operational guidance is provided on the objectives, the employment criterium, and the criterium on transacting with nonresidents included within the SPE definition. The Guidelines provide additional clarifications on specific cases, such as chains of SPEs or SPEs that are part of local enterprise groups.

Additionally, the Guidelines provide practical advice on data collection in terms of data sources and processes. The guidance reflects on survey frameworks, other data sources, and institutional collabo-ration that countries use to compile their statistics. The experience of selected SPE-host economies that are already collecting cross-border SPE statistics has been tapped to further document the collection practices. The objective is to build on the existing knowledge and experience to assist other economies in putting in place a collection system for SPE data. Country examples are provided in an Annex of the Guidelines.

Finally, the Guidelines set forth the underlying framework of the agreed Data Template and elaborate on data reporting. The proposed data collection framework for compiling separate statistics on resident SPEs targets selected balance of payments and international investment position components, which are explained in the Guidelines.

The Guidelines are not intended to be a “stand-alone” document. Users of the Guidelines should be familiar with the BPM6 and the BPM6 Compilation Guide. The guidance is applicable to circumstances in different economies. With respect to data collection, national compilers should develop and adapt the data sources and compilation methods as appropriate to their national circumstances, by considering the practical and legal constraints in their own economies.

Acknowledgments

The Guidelines have been prepared by the IMF Statistics Department (STA), under the overall leadership of STA Deputy Director Mr. Gabriel Quirós-Romero. Ms. Padma S. Hurree Gobin (Senior Economist, Balance of Payments Division, STA) was the primary drafter of the Guidelines, who also combined and edited all the contributions. The work was closely supervised by Mr. Artak Harutyunyan (Deputy Chief, Balance of Payments Division, and later Advisor (as from October 2020), STA), under the general direction of Mr. Carlos Sánchez-Muñoz (Assistant Director and Division Chief, Balance of Payments Division, STA). Ms. Fadhila Alfaraj (Special Appointee, Balance of Payments Division, STA) and Ms. Tatiana Carandang (Staff Assistant, Balance of Payments Division, STA) supported the production of the Guidelines.

Within the Balance of Payments Division, the Guidelines have benefited from comments provided 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). Staff from other divisions of STA also provided comments, including Financial Institutions Division (Ms. Alicia Hierro, Senior Economist); Government Finance Division (Mr. David Bailey, Mr. Noriaki Kinoshita, Mr. Philip Stokoe, and Mr. Tobias Wickens—all Senior Economists); Real Sector Division (Mr. Robert Dippelsman, Deputy Chief, retired, and Ms. Jennifer Ribarsky, Deputy Chief); and Strategy, Standards, and Review Division (Mr. Michael Stanger, Senior Economist). Within the IMF, contributions to the discussions by Mr. Ruud de Mooij (Division Chief, Fiscal Affairs Department—FAD), Ms. Dinar Prihardini (Economist, FAD), Ms. Antje Pflugbeil (FAD External Appointee), and Mr. Gian Maria Milesi Ferretti (Deputy Director, Research Department) are gratefully acknowledged.

STA wishes to acknowledge, with thanks, for their continued support and contributions all members of the Committee; members of the ECB's WGES, including ECB staff and its Chair Ms. Olga Monteiro; the OECD's WGIIS and Ms. Maria Borga (formerly OECD); Ms. Patricia Abaroa (U.S. Bureau of Economic Analysis); Messrs. Krit Carlier and Melle Bijlsma (De Nederlandsche Bank); Mr. Paul Feuvrier (Banque Centrale de Luxembourg); Mr. Patrick Lengg (Swiss National Bank); Mr. Fernando Lemos (Banco Central do Brasil); and Ms. Beata Montvai (Central Bank of Hungary).

Louis Marc Ducharme

Chief Statistician, Data Officer, and Director

Statistics Department

International Monetary Fund

Acronyms

Introduction

At the center of statistical challenges related to globalization are multinational enterprises (MNEs) with a wide range of economic activities and extensive use of special purpose entities (SPEs). MNEs increasingly resort to setting up global structures to benefit from different legal and tax regimes, with a view to maximizing their global after-tax profits.

In a complex global financial system with increased cross-border flows and positions, SPEs play an important role. Lane and Milesi-Ferretti (2018) observe that cross-border direct investment (DI) positions have continued to expand, reflecting primarily positions vis-à-vis financial centers, which include an important role for SPEs. The significant growth of SPE-related cross-border financial flows and positions underscores the need for external sector statistics (ESS) to untangle SPE activities from those of other economic agents.

With increasing globalization, SPEs have evolved beyond those structures described in the current statistical manuals. While originally set up by financial institutions and MNEs to carry out financial activities, such as raising capital or holding assets and liabilities, SPEs have evolved to also include nonfinancial specialized entities established by MNEs to manage intellectual property rights, research and development, trade, and other activities as part of the groupwide financial and profit maximization strategy.

In light of their evolving nature and importance, there has been a growing demand from users to separately identify SPEs within ESS with a view to improving the analytical value of cross border statistics. These entities' activities usually have no or limited direct impact on the domestic (host) economy, such that the evolution of SPE flows might not be correlated with the host economies' business cycles. In this context, the need has emerged to further develop international guidance on SPEs beyond what is in the Balance of Payments and International Investment Position Manual, sixth edition (BPM6), to be able to collect separate data on SPE activities.

Separately identifying SPE cross-border statistics has been a priority for the IMF Committee on Balance of Payments Statistics (the Committee) since 2016.² The separate identification within the balance of payments and international investment position (IIP) statistics will help users, including market analysts and policymakers, to better (1) assess the economic impact of cross-border financial flows and positions on the domestic economy, (2) understand the activities of MNEs, (3) identify cross-border vulnerabilities, and (4) gauge data quality and coverage.

The purpose of these Guidelines is to assist compilers in the practical implementation of the SPE definition endorsed by the Committee (see next section) with a view to establishing data collection and reporting. With respect to data collection, national compilers should develop and adapt the data sources and compilation methods in ways that are appropriate to their national circumstances, by considering the practical and legal constraints in their own economies.