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
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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