D.3. Treating the activities of special purpose entities in a FATS context
15.42. Special purpose entities (SPEs) engage in various activities and take various forms. Thus, compilers should pay attention to the treatment of SPEs in compiling FATS. Although there is no precise definition of SPEs in the 2008 SNA, BPM6 and the OECD Benchmark Definition of Foreign Direct Investment, 4th edition (BD4), those publications include some elements that help to better identify SPEs and their activities.
15.43. A unit can be considered an SPE if it meets the following criteria:
(a) It is a legal entity(a) formally registered with a national authority[1] and (b)subject to fiscal and other legal obligations of the economy in which it is resident (see 2008 SNA, para. 4.6, for the definition of a legal entity;
(b) The entity is ultimately controlled by a non-resident parent, directly or indirectly;
(c) The entity has few employees, or none, little or no production in the host economy and little or no physical presence in the economy in which it is created by its parent, which is typically located in another country;
(d) Almost all the assets and liabilities of the entity represent investments in or from other countries;
(e) The core business of the entity consists of group financing or holding activities; i.e., the channelling of funds from non-residents to other non-residents. However, in its daily activities, managing and directing plays only a minor role.
15.44. According to the 2008 SNA, judgment must be made regarding the independence of an SPE as an institutional unit. However, non-resident SPEs owned by residents (and resident SPEs owned by non-residents), which are the main focus of FATS, are treated as independent institutional units by convention. When those SPEs transact by their own decision, their transactions, in principle, should be recorded in the same manner as those of non-SPE foreign affiliates.
15.45. At the same time, however, it should be considered that SPEs are often established to facilitate cross-border ownership of enterprises and thus generally do not have any substantive services activities. Therefore, special treatment of SPEs in FATS (and FDI statistics) might provide economically more meaningful data and thus enhance their usefulness.[2] For example, it would be relevant to separately identify SPEs and to compile supplementary data without considering certain types of SPEs.
15.46. Nevertheless, some SPEs are engaged in services activities in addition to passing through funds, and such types of entities should not be ignored in FATS. The appropriateness of considering SPEs in FATS depends on their activities. Identifying their activities is not straightforward, but one way of doing so is to classify SPEs according to the 2008 SNA sector classification, assuming that such classification is conducted by the statistics compilers of host countries.
15.47. Among the various types of SPEs, holding corporations, shell companies and conduits are often established only to channel the funds between non-residents. Thus, supplementary data looking through such pass-through entities could be useful for users in relation to FATS. In contrast, royalties and licensing companies, merchanting companies, and securitization companies engage in non-captive financial and non-financial activities. The other types of SPEs provide financial services, although most of them are captive financial corporations. Thus, those non-pass-through entities should not be included.
15.48. Compilers should also consider that it may be difficult to collect information on SPEs given that they have only a small physical presence, or none, or given the ways in which they are accounted for in the national statistical system. In fact, the treatment of SPEs in national statistics will strongly influence the options for the FATS compiler (see chapter 6 for more information).
15.49. More guidance on SPEs and their treatment in statistics may be found in the Eurostat Foreign Affiliates Statistics (FATS) Recommendations Manual, as well in chapter 4 of the United Nations Economic Commission for Europe (ECE)/OECD/Eurostat publication entitled “The impact of globalization on national accounts” .