Manual on Statistics of International Trade in Services

B. Universe to be covered 
4.16. Methodological antecedents for FATS statistics 
are much less well developed than those for trade 
between residents and non-residents, where the 
transactions to be covered are clearly indicated by 
BPM5. The conventions with respect to residence found 
in BPM5 and the 1993 SNA can provide clear guidance 
on the residence of enterprises and the present 
Manual
recommends that they be followed without exception, 
but no internationally agreed ownership concept exists 
that was designed specifically with FATS statistics in 
mind. Nor is there agreement on the types of firms to be 
covered and, specifically, on whether the statistics 
should cover all producers or only producers of services.
These issues are addressed in turn below. 
1. Ownership criteria 
4.17. Although GATS does not provide statistical 
definitions, it does give some indication of the kind of 

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ownership criteria that would be useful in support of the 
agreement. The agreement refers to concepts of 
“ownership”, “control”, and “affiliation”. Under GATS, 
a juridical person (such as a business enterprise) is 
“owned” by persons of a WTO member country if more 
than 50 percent of the equity interest in it is beneficially 
owned by persons of that member country; “controlled” 
by persons of a member country if such persons have the 
power to name a majority of its directors or otherwise to 
legally direct its actions; and “affiliated” with another 
person when it controls or is controlled by that other 
person, or when it and the other person are both 
controlled by the same person (article XXVIII, section 
[n]). Thus, GATS would appear concerned with cases of 
majority ownership––where, by that very fact, control 
typically could be assumed to exist––as well as by cases 
in which control can be demonstrated to have been 
achieved with a smaller ownership share.
4.18. Among statistical guidelines, rules relating to 
ownership appear in BPM5, in BD3 and in the 1993 
SNA. All of these use ownership of 10 per cent of the 
ordinary shares or voting power (for an incorporated 
enterprise) or the equivalent (for an unincorporated 
enterprise) as a lower threshold for direct investment, 
but they also provide rules that are more closely aligned 
with the ownership and control concepts found in 
GATS. All three of these harmonized standards define 
“subsidiaries” as enterprises in which the direct investor 
owns more than 50 per cent, “associates” as enterprises 
in which the direct investor owns between 10 and 50 per 
cent, and “branches” as wholly or jointly owned 
unincorporated enterprises. In the 1993 SNA, 
subsidiaries and branches are considered to be “foreign-
controlled enterprises”; associates may be included in, or 
excluded from, this category by individual countries 
according to their qualitative assessment of foreign 
control.
4.19. The 
present 
Manual
considers that it is relevant 
to consider criteria used or recommended at national and 
regional levels. Here majority ownership––that is, cases 
in which the direct investor owns more than 50 per cent 
of the ordinary shares or voting power in the direct 
investment enterprise––is seen to have played a key role 
in determining the subset of foreign affiliates that is 
covered. A report of a Eurostat task force on foreign 
affiliates trade indicated agreement by its members that 
the criterion of majority owned would be used because 
the concept is very clear and in this way very 
operational.
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While the report indicated other criteria 
that could be used in identifying foreign-controlled 
firms, actual collection of FATS statistics by Eurostat 
and OECD has been based on majority ownership; in