Manual on Statistics of International Trade in Services

1. Concept and definition of residence 
3.3. The residence concept is central to the measurement 
of transactions between residents and non-residents. The 
concept of residence in the present 
Manual
is identical to 
38
Washington, D.C., 1996 and 1995, respectively. 
that used in BPM5 and the 1993 SNA. It is not based on 
nationality or legal criteria but on a transactor’s 
centre of 
economic interest
. Further, because territorial boundaries 
recognized for political purposes may not always be 
appropriate for economic purposes, the 
economic 
territory
of a country is used as the relevant 
geographical area to which the concept of residence is 
applied. An institutional unit is a resident unit of a 
country or economy when it has a centre of economic 
interest in the economic territory of a country. 
3.4. The economic territory of a country consists of the 
geographic territory administered by a government.
Persons, goods and capital circulate freely within this 
territory. Included are islands that belong to the country, 
airspace, territorial waters and the continental shelf lying 
in international waters over which the country enjoys 
exclusive rights or over which it has, or claims to have, 
jurisdiction in respect of the right to fish or to exploit 
fuels or minerals below the seabed. Also included are 
territorial enclaves, such as embassies, consulates, 
military bases, scientific stations, information or 
immigration offices and aid agencies, located in other 
economies and used by the Government for diplomatic, 
military, scientific or other purposes, with the formal 
political agreement of the Governments of the 
economies where these enclaves are physically located. 
Thus, while territorial enclaves used by foreign 
Governments (or international organizations) may be 
located within a country’s geographical boundaries, such 
enclaves are not included in the host country’s economic 
territory. 
3.5. An enterprise has a centre of economic interest, and 
thus residence, in an economy when it engages and 
intends to continue to engage in economic activities on a 
significant scale either indefinitely or over a long period 
of time from one or more locations, not necessarily 
fixed, within the economic territory of that economy. A 
period of one year is suggested as a guideline for 
determining residence, but this is not an inflexible rule. 
3.6. 
Production undertaken outside the economic 
territory of a resident enterprise by the personnel, plant 
and equipment of that resident enterprise is treated as