Manual on Statistics of International Trade in Services

3.13. Civil servants (including diplomats) and military
personnel employed abroad in government enclaves
continue to have centres of economic interest in their
home countries while, and however long, they work in
the enclaves. They continue to be residents in their home
economies even if they live in dwellings outside of these
enclaves. 39 However long they study abroad, students
should be treated as residents of their home economy,
provided that they remain members of households in
their home economies. In these circumstances, their
centres of economic interest remain in their economies
of origin, rather than in the economies where they study.
Medical patients abroad are also treated as residents of
their economies of origin, even if their stays are one year
or more, as long as they remain members of households
in their economies of origin. Any other individual who
moves to another economy and stays, or expects to stay,
for a year or more, is considered to undergo a change of
centre of economic interest, that is, he or she is
considered to be a migrant.
3.14. Refugees are persons displaced from their home
economies by natural disasters or other causes (such as
persecution or conflict). Such displacement to other
economies may be for a short period or on a long-term
basis. In the case of short-term displacement, refugees
continue to be residents of their home economies;
however, if the displacement is for a long period and the
refugees change their centre of economic interest, they
are considered to be migrants and thus no longer
residents of their original economies.
3.15. The present <strong>Manual</strong> follows BPM5 in its concept
of residence; issues relating to this concept are discussed
in more detail in chapter IV of BPM5.
2. Valuation of transactions
3.16. Market price should be used as the basis for
valuation of transactions in international trade in
services. Thus, transactions will generally be valued at
the actual price agreed on by the supplier and the
consumer. BPM5 identifies some of the more common
circumstances under which it may not be possible to
establish a market price and recommends that in such
circumstances it is appropriate to develop a proxy
measure, if possible by analogy with known market
39 Because embassies and consulates are considered
extraterritorial to the economies in which they are located, the
compensation received by host country (local) staff is
classified as payments of income to residents by nonresidents.
28
prices established under conditions that are considered
essentially the same as those pertaining to the unpriced
transaction.
3.17. Particular problems may arise in valuing
international transactions between related 40 enterprises
integrated under the same management but situated in
different economies. Transactions may not be market
transactions because there is a lack of independence
among the parties to the exchange, and the prices used in
portraying such transactions in the books of the
enterprises (called transfer prices) may or may not be
market prices. Transfer pricing that is not based closely
on market considerations could be expected to be
common among related enterprises conducting business
across national boundaries, because disparities between
taxes and regulations imposed by different governments
are a factor in management decisions on the optimum
allocation of profits among units. 41
3.18. The present <strong>Manual</strong> follows BPM5 by
recommending that, where distortions between market
and transfer prices are large, replacement of book values
with market value equivalents is desirable in principle,
although in practice such prices may be difficult to
estimate. In view of the practical difficulties involved in
substituting an imputed or notional market value for an
actual transfer value, substitution should be the
exception rather than the rule. However, if certain
transfer prices are so divorced from those of similar
transactions that the transfer prices significantly distort
measurement, the prices should either be replaced by
market price equivalents or be separately identified for
analytical purposes.
3. Other principles relating to the recording of
transactions
3.19. The appropriate time to record transactions in
services is when they are rendered (that is, when they are
delivered or received). This may differ from the time
40
Related enterprises are those where there exists a direct
investment relationship, as described in BPM5 and BD3.
BPM5 defines the direct investment relationship as
ownership, by a direct investor resident in one economy, of 10
per cent or more of the ordinary shares or voting power (for
an incorporated enterprise) or the equivalent (for an
unincorporated enterprise) of an enterprise resident of another
economy. Further, direct investment enterprises comprise
those entities that are either directly or indirectly owned by
the direct investor. For further information, see box 7.
41
For further discussion on transfer pricing, see BPM5, paras.
97–103.