Manual on Statistics of International Trade in Services

part of host country production, and the enterprise is 
treated as a resident unit (branch or subsidiary) of that 

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country, if the enterprise meets the conditions noted in 
paragraph 3.5 above. In addition, the enterprise must 
maintain a complete and separate set of accounts of local 
activities (that is, income statement, balance sheet, 
transactions with the parent enterprise), pay income 
taxes to the host country, have a substantial physical 
presence, receive funds for enterprise work for the 
enterprise account and so forth. If these conditions are 
met, the enterprise is considered a foreign affiliate (see 
also chapter IV below). If these conditions are not met, 
the output of the enterprise should be classified as an 
export by a resident enterprise. Such production can 
generate an export only if the production is classified as 
domestic production (undertaken by a resident even 
though the physical process takes place outside the 
economic territory).
3.7. These considerations also apply to the particular 
case of construction activity carried out abroad by a 
resident producer. Special mention should be made of 
construction involving major specific projects (bridges, 
dams, power stations etc.) that often take several years to 
complete and are carried out and managed by non-
resident enterprises through unincorporated site offices. 
In most instances, site offices will meet the criteria 
requiring that site office production be treated (as would 
the production of a branch or affiliate) as the production 
of a unit resident in the host economy and as part of the 
production of the host economy rather than as an export 
of services to that economy. 
3.8. Offshore enterprises, including those engaged in 
manufacturing processes (including assembly of 
components manufactured elsewhere), trading and 
financial activity, are residents of the economies in 
which the offshore enterprises are located. This applies 
regardless of location in special zones of exemption 
from customs or other regulations or concessions. 
3.9. 
Similarly, the principles used to determine the 
residence of an enterprise are applicable to an enterprise 
that operates mobile equipment (such as ships, aircraft, 
drilling rigs and platforms, and railway rolling stock) 
outside the economic territory where the enterprise is 
resident. Such operations may take place in (a) 
international waters or airspace or (b) another economy. 
In the first case (an enterprise with operations taking 
place in international waters or airspace), the activities 
should be attributed to the economy in which the 
operator maintains residence. In the second case (an 
enterprise with production taking place in another 
economy), the enterprise may be considered to have a 
centre of economic interest in the other economy. If 
operations (such as a railway network) are carried out by 
an enterprise on a regular and continuing basis in two or 
more countries, the enterprise is deemed to have a centre 
of economic interest in each country and thus to have 
separate resident units in each. The enterprises must also 
be accounted for separately by the operator and 
recognized as separate enterprises by tax and licensing 
authorities in each country of operation. In cases 
involving the leasing of mobile equipment to one 
enterprise by another for a long or indefinite period, the 
lessee enterprise is deemed to be the operator, and 
activities are attributed to the country where the lessee is 
resident. 
3.10. For ships flying flags of convenience, it is often 
difficult to determine the residence of the operating 
enterprise. There may be complex arrangements 
involving ownership, mode of operation and chartering 
of such ships. In addition, the country of registry differs, 
in most instances, from the operator’s (or owner’s) 
country of residence. Nonetheless, in principle, the 
shipping activity is attributed to the country of residence 
of the operating enterprise. If an enterprise establishes, 
for tax or other considerations, a branch in another 
country to manage the operation, the operation is 
attributed to the resident (branch) operating in that 
country. 
3.11. Transactions of agents should be attributed to the 
economies of principals on whose behalf the transactions 
are undertaken and not to the economies of agents 
representing or acting on behalf of principals. However, 
services rendered by agents to enterprises represented 
should be attributed to the economies in which the 
agents are residents. 
3.12. A household has a centre of economic interest 
where it maintains one or more dwellings within the 
country that members of the household use as their 
principal residence. All individuals who belong to the 
same household must be residents of the same economy. 
If a resident household member leaves the economic 
territory and returns to the household after a limited 
period of time, the individual continues to be a resident 
even if he or she makes frequent journeys outside the 
economic territory. An individual may cease to be a 
member of a resident household when he or she works 
continuously for one year or more in a foreign country. 
Even if an individual continues to be employed and paid 
by an enterprise that is resident in his or her home 
country, that person should normally be treated as a 
resident in the host country if he or she works 
continuously in the host country for one year or more.

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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.
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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 
Manual
follows BPM5 in its concept 
of residence; issues relating to this concept are discussed 
in more detail in chapter IV of BPM5.