Manual on Statistics of International Trade in Services

Box 8.   Immediate and ultimate investors  
Foreign-owned affiliates in the compiling economy may be grouped geographically based on the country of the 
immediate investor (first foreign parent) or the country of the ultimate investor (ultimate beneficial owner). The first 
foreign parent is the first foreign person in the chain of ownership of the affiliate. The UBO is the first person in the chain 
- beginning with and including the first foreign parent - that is not majority owned by another person. The following 
examples illustrate how these entities may be identified in particular cases.  In each case, the chain of ownership runs 
from top to bottom, with the company at the bottom being the foreign-owned affiliate whose ownership is at issue. 
_________________________________________________________________________________________________________________________________________________________ 
 
 I 
II 
III 
IV 
V 
VI 
_________________________________________________________________________________________________________________________________________________________ 
 
  Company A 
Company C 
Company F 
Company I 
Company L 
Company O 
 
| | | | | | 
 
100% 80%  70%  40% 100% 50% 
 
| | | | | | 
  Company B 
Company D 
Company G 
Company J 
Company M  
Company P 
 
  | | | |   
  
80% 
60% 
90% 
40% 
 
  | | | |   
 
 
Company E 
Company H 
Company K 
Company N 
_________________________________________________________________________________________________________________________________________________________ 
 
Case I.   
Company A is both the foreign parent and the UBO of company B. 
Case II.   
Company D is the foreign parent of company E.  Because company D is, in turn, majority owned by 
company C, company C is the UBO of company E; its country would be considered the country of 
ownership of company E in FATS statistics. 
Case III.  
Following the same reasoning as in Case II, company G is the foreign parent of company H, while 
company F is its UBO.  Note that company F’s indirectly held ownership in company H is only 42 per 
cent––the product of its 70 per cent share of company G and company G’s 60 per cent share in 
company H. Company H is nonetheless included in FATS statistics as a foreign-owned affiliate because 
the majority ownership criterion relates to the ownership interest of the first foreign parent (which is the 
direct investor), rather than to that of the UBO.  Despite company F’s lack of majority ownership, it can 
be presumed to control company H because each entity in a chain of majority ownerships can control 
the entity below it, including that entity’s actions with respect to the entities that are, in turn, below it. 
Case IV.  
Company J is both the foreign parent and the UBO of company K.  Company I is not the UBO because 
it is not the majority owner of company J. 
Case V.   
Company M is the foreign parent of company N.  Because company M is, in turn, majority owned by 
company L, company L is the UBO of company N.  However, company N is not covered by FATS 
statistics because it is not majority owned by its foreign parent. 
Case VI.  
Company O is both the foreign parent and the UBO of company P.  Company P is not covered by FATS 
statistics because it is not majority owned by its foreign parent, but it nonetheless represents a case that 
may be deemed relevant for the purposes of GATS or globalization analysis.  Thus, the compiling 
country may wish to show data for company P (and other cases of interest) on a supplemental basis (see 
paras. 4.21 and 4.22 above).
 

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4.35.  Abstracting from practical considerations, the 
country of ultimate beneficial ownership is conceptually 
preferable for the attribution of variables concerning 
industrial activity because that is the country that 
ultimately owns or controls - and therefore derives the 
benefits from owning or controlling - the direct 
investment enterprise.  In the light of the relevance of 
the UBO basis and the demonstration by a number of 
countries that compilation on this basis is feasible, the 
present  Manual recommends the UBO basis as the first 
priority for compilation of FATS statistics and the basis 
on which estimates should be prepared in the greatest 
detail.  However, considering that information on first 
foreign parents may be available as a by-product of 
linkages to FDI data and to facilitate comparisons with 
these data, countries are encouraged to make available 
some data in which variables are attributed according to 
the country of the first foreign parent. 
(b) Outward FATS 
4.36. For affiliates owned by residents of the 
compiling economy, two options for attribution of 
FATS variables by country are possible.  The variables 
could be attributed to the country of location of the 
affiliate or - if the ownership is through a directly held 
affiliate located in another country - to the country of 
that affiliate.  The present Manual recommends that 
attribution be to the country of the affiliate whose 
operations are described by the variables, for that is the 
country in which the foreign direct investor’s 
commercial presence exists, and it is the country where 
the various activities (sales, employment etc.) tracked 
by the statistics are carried out.  This recommendation 
is consistent with the treatment of foreign-controlled 
enterprises in the 1993 SNA, in that the value added in 
production by the enterprise is attributed in both cases 
to (i.e., is included in the gross domestic product of) 
the economy of location of the enterprise.  To the 
extent that the statistics may be used in conjunction 
with statistics on resident/non-resident foreign direct 
investment transactions recorded in balance of 
payments accounts, it should be noted that the latter are 
attributed, following BPM5 and BD3, to the immediate 
host country, as is appropriate for tracking financial 
flows and positions.
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  BPM5 also recognizes that direct investment transactions (but 
not positions) involving parties located in third countries 
might, following the “transactor” basis of regional allocation, 
be attributed to those countries; an example of such a 
transaction would be the sale or purchase by a direct investor 
(c) Note on the equal ownership of shares by 
residents of more than one country 
4.37.  Ordinarily, FATS variables for a given foreign 
affiliate are attributed in their entirety to a single country 
of owner.  As descriptors of the operations of affiliates, 
they should not be factored down by ownership shares.  
Nor should the values of the variables be apportioned 
between the majority owner and any foreign minority 
owners.  However, where supplemental statistics are 
provided covering cases in which foreign control has 
been achieved other than through majority ownership by 
a single investor, classification dilemmas may arise 
where direct investors of different countries have 
collectively achieved majority ownership through 
holdings of equal shares.  Because the ownership is 
evenly split, the determination of the country of owner 
has to be made using criteria other than ownership 
percentages.  
4.38.  Although it is sometimes difficult to reach a 
decision in such cases, there is often some factor that 
would lead to the selection of one country rather than the 
other.  For example, if one owner’s interest in the 
affiliate is held directly and the other owner’s interest is 
held indirectly, the affiliate generally would be classified 
in the country of the owner holding the direct interest.  
As another example, if one of the foreign owners is a 
government entity, then the country of that Government 
would probably be considered the country of owner.  
Finally, if one of the foreign owners is a holding 
company or is located or incorporated in a tax haven 
country, then the country of the other owner would 
probably be considered the country of owner.  In the 
absence of any such factor that could be used as a basis 
of attribution, the value of FATS variables may be 
allocated evenly among the foreign countries of 
ownership.  However, data so allocated may pose 
problems of interpretation, and efforts should first be 
made to determine a basis for allocation to a single 
country.