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Regulation (EU) No 549/2013 of the European Parliament and of the Council of 21 May 2013 on the European system of national and regional accounts in the European Union Text with EEA relevance

Type Regulation

Publication 2013-06-26

Last updated 2025-09-01

State In force

Department Council of the European Union, European Parliament

Source EUR-Lex

articles 13

Reform history JSON API

(a) uses and resources in the allocation of primary income account of the sectors;

(b) uses and resources in the external account of primary incomes and current transfers.

Other investment income (D.44)

Investment income attributable to insurance policy holders (D.441)

4.68 Definition: Investment income attributable to insurance policy holders corresponds to total primary incomes received from the investment of insurance technical reserves. The reserves are those where an insurance corporation recognises a corresponding liability to the policyholders.

Insurance technical reserves are invested by insurance enterprises in financial assets or land (from which net property income, i.e. after deducting any interest paid, is received) or in buildings (which generate net operating surpluses).

Investment income attributable to insurance policy holders is recorded separately between holders of non-life and life policies.

For non-life policies, the insurance corporation has a liability towards the policy holder of the amount of the premium deposited with the corporation but not yet earned, the value of any claims due but not yet paid and a reserve for claims not yet notified or notified but not yet settled. Set against this liability, the insurance corporation holds technical reserves. The investment income on these reserves is treated as income attributable to the policy holders, then distributed to the policy holders in the allocation of primary income account and paid back to the insurance corporation as a premium supplement in the secondary distribution of income account.

For an institutional unit operating a standardised loan guarantee scheme against fees, there could also be investment income earned on the reserves of the scheme and this must also be shown as being distributed to the units paying the fees (which may not be the same units which stand to benefit from the guarantees) and treated as supplementary fees in the secondary distribution of income account.

For life insurance policies and annuities, insurance corporations have liabilities towards the policy holders and annuitants equal to the present value of expected claims. Set against those liabilities, insurance corporations have funds belonging to the policy holders consisting of bonuses-declared-for-with-profits policies as well as provisions for both policy holders and annuitants of the payment of future bonuses and other claims. Those funds are invested in a range of financial and non-financial assets.

The bonuses declared to holders of life policies are recorded as investment income receivable by the policyholders and are treated as premium supplements paid by the policyholders to the insurance corporations.

The investment income attributable to life insurance policy holders is recorded as payable by the insurance company and receivable by households in the allocation of primary income account. Unlike the case of non-life insurance or pensions, the amount carries through to saving and is then recorded as a financial transaction, specifically an increase in the liabilities of life insurance corporations, in addition to new premiums less the service charge less benefits payable.

Investment income payable on pension entitlements (D.442)

4.69Pension entitlements arise from one of two different types of pension schemes. These are defined contribution schemes and defined benefit schemes.

A defined contribution scheme is one where contributions by both employers and employees are invested on behalf of the employees as future pensioners. No other source of funding of pensions is available and no other use is made of the funds. The investment income payable on defined contribution entitlements is equal to the investment income on the funds plus any income earned by renting land or buildings owned by the fund.

The characteristic of a defined benefit scheme is that a formula is used to determine the level of payments to be made to pensioners. This characteristic makes it possible to determine the level of entitlements as the present value of all future payments, calculated using actuarial assumptions about life lengths and economic assumptions about the interest or discount rate. The present value of the entitlements existing at the start of the year increases because the date when the entitlements become payable is one year nearer. This increase is regarded as investment income attributed to the pension holders in the case of defined benefit scheme. The amount of the increase is neither affected by whether the pension scheme actually has sufficient funds to meet all the obligations nor by the type of increase in the funds, whether it is investment income or holding gains, for example.

Investment income attributable to collective investment fund shareholders (D.443)

4.70Investment income attributable to collective investment fund shareholders, including mutual funds and unit trusts, consists of the following separate components:

— dividends attributable to collective investment fund shareholders (D.4431),

— retained earnings attributable to collective investment fund shareholders (D.4432).

The dividend component is recorded in exactly the same manner as dividends for individual corporations, as described above. The retained earnings component is recorded using the same principles as those described for foreign direct investment enterprises but is calculated excluding any reinvested earnings on foreign direct investment. The remaining retained earnings are attributed to the investment fund shareholders leaving the investment fund with no saving, and are re-injected into the fund by the investment fund shareholders in a transaction recorded in the financial account.

The property income received by mutual funds is recorded as shareholders' property income even if it is not distributed but reinvested on their behalf.

Shareholders indirectly pay out of their fund shares to management companies for managing their investments. This service charge is expenditure by shareholders, and not expenditure of funds.

Time of recording: other investment income is recorded when it accrues.

4.71In the system of accounts, other investment income is recorded as:

(a) resources in the allocation of primary income account of policy and investment fund holders;

(b) uses in the allocation of primary income account of the insurers, pension funds and investment funds;

Rent (D.45)

4.72 Definition: rent is the income receivable by the owner of a natural resource for putting the natural resource at the disposal of another institutional unit.

There are two different types of resource rents: rent on land, and rent on subsoil resources. Resource rents on other natural resources such as radio spectra follow the same pattern.

The distinction between rent and rentals is that rent is a form of property income and rentals are payments for services. Rentals are payments made under an operating lease to use a fixed asset belonging to another unit. Rent is a payment made under a resource lease for access to a natural resource.

Rent on land

The rent received by a landowner from a tenant constitutes a form of property income. Rents on land also include the rents payable to the owners of inland waters and rivers for the right to exploit such waters for recreational or other purposes, including fishing.

A landowner pays land taxes and incurs maintenance expenses as a consequence of owning the land. Such taxes and expenses are treated as payable by the person entitled to use the land, who is deemed to deduct them from the rent that he would otherwise be obliged to pay to the landowner. Rent reduced in this way by taxes or other expenses for which the landowner is liable is called 'after-tax rent'.

4.73Rents on land do not include the rentals of buildings and of dwellings situated on it; those rentals are treated as the payment for a market service provided by the owner to the tenant of the building or dwelling, and are recorded in the accounts as the intermediate or final consumption of the tenant. If there is no objective basis on which to split the payment between rent on land and rental on the buildings situated on it, the whole amount is treated as rent when the value of the land is estimated to exceed the value of the buildings on it and as rental otherwise.

Rents on subsoil assets

4.74This heading includes the royalties that accrue to owners of deposits of minerals or fossil fuels (coal, oil or natural gas), whether private or government units, who grant leases to other institutional units permitting them to explore or to extract such deposits over a specified period of time.

4.75Time of recording of rents: rents are recorded in the period when payable.

4.76In the system of accounts, rents are recorded:

(a) among resources and among uses in the allocation of primary income account of sectors;

(b) among resources and among uses in the external account of primary incomes and current transfers.

CURRENT TAXES ON INCOME, WEALTH, ETC. (D.5)

4.77 Definition: current taxes on income, wealth, etc. (D.5) cover all compulsory, unrequited payments, in cash or in kind, levied periodically by general government and by the rest of the world on the income and wealth of institutional units, and some periodic taxes which are assessed neither on that income nor that wealth.

Current taxes on income, wealth, etc. are divided into:

(a) taxes on income (D.51);

(b) other current taxes (D.59).

Taxes on income (D.51)

4.78 Definition: taxes on income (D.51) consist of taxes on incomes, profits and capital gains. They are assessed on the actual or presumed incomes of individuals, households, corporations or NPIs. They include taxes assessed on holdings of property, land or real estate when these holdings are used as a basis for estimating the income of their owners.

Taxes on income include:

(a) taxes on individual or household income, examples of which are income from employment, property, entrepreneurship, pensions, etc., and including taxes deducted by employers, for example pay-as-you-earn taxes. Taxes on the income of owners of unincorporated enterprises are included here;

(b) taxes on the income or profits of corporations;

(d) taxes on winnings from lotteries or gambling, payable on the amounts received by winners as distinct from taxes on the turnover of producers that organise gambling or lotteries which are treated as taxes on products.

Other current taxes (D.59)

4.79Other current taxes (D.59) includes:

(a) current taxes on capital which consist of taxes payable on the ownership or use of land or buildings by owners, and current taxes on net wealth and on other assets, for example jewellery — except taxes mentioned in D.29 (which are paid by enterprises as a result of engaging in production) and those in D.51 (taxes on income);

(b) poll taxes, levied per adult or per household, independently of income or wealth;

(d) payments by households for licences to own or use for non-business purposes vehicles, boats or aircraft, or for licences for recreational hunting, shooting or fishing, etc. The distinction between taxes and purchases of services from government is defined according to the same criteria as those used in the case of payments made by enterprises namely, if the issue of licenses involves little or no work on the part of government, the licences being granted automatically on payment of the amounts due, it is likely that they are simply a device to raise revenue, even though the government may provide some kind of certificate, or authorisation, in return; in such cases their payment is treated as taxes. If, however, the government uses the issue of licences to organise some proper regulatory function (such as checking the competence, or qualifications, of the person concerned), the payments made are treated as purchases of services from government rather than payments of taxes, unless the payments are clearly out of all proportion to the cost of providing the services;

(e) taxes on international transactions, for example travel abroad, foreign remittances, foreign investments, etc., except those payable by producers and import duties paid by households.

4.80Current taxes on income, wealth, etc. do not include:

(a) inheritance taxes, death duties or taxes on gifts between living persons, which are deemed to be levied on the capital of the beneficiaries and are shown under the heading capital taxes (D.91);

(b) occasional or exceptional levies on capital or wealth, which are recorded as capital taxes (D.91);

(c) taxes on land, buildings or other assets owned or rented by enterprises and used by them for production, such taxes being treated as other taxes on production (D.29);

(d) payments by households for licences other than licences for the use of vehicles, boats or aircraft, or licences for recreational hunting, shooting or fishing: driving or pilot's licences, firearm licences, and fees to government such as museum or library admissions, garbage disposal fees, payments for passports, airport fees, court fees etc. which are treated in most cases as purchases of services rendered by government, if they satisfy the criteria set out in point (d) of paragraph 4.79 to be recorded as services.

4.81The total value of the taxes includes interest charged on arrears of taxes due and fines imposed by taxation authorities if there is no data to estimate such interest and fines separately; it includes charges imposed in connection with the recovery and assessment of taxes outstanding, less the amount of any rebates made by general government as a matter of economic policy and any refunds made as a result of over-payments.

Subsidies and social benefits made available via the tax system in the form of tax credits and the incidence of linking payment systems with the tax collection system are increasing. Tax credits represent tax relief and so reduce the tax liability of the beneficiary.

If the tax credit system results in the beneficiary receiving the excess when the relief is greater than the liability, the tax credits system is a payable tax credit system. Under a payable tax credits system, payments can be awarded to non-taxpayers as well as taxpayers. Under a payable tax credits system, the whole amount of tax credits is recorded as government expenditure, and not as a reduction of tax revenue.

In contrast, some tax credit systems are non-payable tax credits systems where tax credits are limited to the size of the tax liability. Under a non-payable tax credits system, all tax credits are embedded in the tax system and reduce government tax revenue.

4.82Current taxes on income, wealth, etc. are recorded at the time when activities, transactions or other events occur which create the liabilities to pay.

However, some economic activities, transactions or events, which under tax legislation ought to impose on the units concerned the obligation to pay taxes, permanently escape the attention of tax authorities. It would be unrealistic to assume that such activities, transactions or events give rise to financial assets or liabilities in the form of payables or receivables. The amounts to be recorded are determined by the amounts due for payment only when evidenced by tax assessments, declarations or other instruments which create liabilities in the form of clear obligations to pay on the part of taxpayers. Missing taxes are not imputed if not evidenced by tax assessments.

Taxes recorded in the accounts are derived from two sources: amounts evidenced by assessments and declarations, and cash receipts.

(a) If assessments and declarations are used, the amounts shall be adjusted by a coefficient reflecting assessed and declared amounts never collected. As an alternative treatment, a capital transfer to the relevant sectors is recorded equal to the same adjustment. The coefficients shall be estimated on the basis of past experience and current expectations in respect of assessed and declared amounts never collected. They shall be specific to different types of taxes;

(b) If cash receipts are used, they shall be time-adjusted so that the cash is attributed when the activities, transactions or other events took place to generate the tax liability (or when the amount of tax was determined, in the case of some income taxes). This adjustment is based on the average time difference between the activities, transactions or other events (or the determination of the amount of tax) and cash tax receipt.

When retained at source by an employer, current taxes on income, wealth, etc. are included in wages and salaries even if the employer did not pass them on to the general government. The households sector is shown as paying the full amount to the general government sector. The amounts actually unpaid are neutralised under D.995 as a capital transfer from general government to the employers' sectors.

In some cases, the liability to pay income taxes can only be determined in a later accounting period than that in which the income accrues. Some flexibility is therefore needed concerning the point in time at which such taxes are recorded. Income taxes retained at source, such as pay-as-you-earn (PAYE) taxes and regular prepayments of income taxes, may be recorded in the periods in which they are paid and any final tax liability on income can be recorded in the period in which the liability is determined.

Current taxes on income, wealth, etc. are recorded as:

(a) uses in the secondary distribution of income account of the sectors in which the taxpayers are classified;

(b) resources in the secondary distribution of income account of general government;

4.83 Definition: social benefits are transfers to households, in cash or in kind, intended to relieve them from the financial burden of a number of risks or needs, made through collectively organised schemes, or outside such schemes by government units and NPISHs; they include payments from general government to producers which individually benefit households and which are made in the context of social risks or needs.

4.84The list of risks or needs which may give rise to social benefits is as follows:

(a) sickness;

(b) invalidity, disability;

(d) old age;

(e) survivors;

(f) maternity;

(g) family;

(h) promotion of employment;

(i) unemployment;

(j) housing;

(k) education;

(l) general neediness.

In the case of housing, payments made by public authorities to tenants in order to reduce their rents are social benefits, with the exception of special benefits paid by public authorities in their capacity as employers.

4.85Social benefits include:

(a) current and lump-sum transfers from schemes which receive contributions, cover the entire community or large sections of the community and are imposed and controlled by government units (social security schemes);

(b) current and lump sum transfers from schemes organised by employers on behalf of their employees, ex-employees or dependants (other employment related social insurance schemes). Contributions may be made by employees and/or employers; they may also be made by self-employed persons;

(c) current transfers from government units and NPISHs which are not conditional on previous payment of contributions and which are generally linked to an assessment of available income. Such transfers are commonly known as social assistance.

4.86Social benefits exclude:

(a) insurance claims based on policies taken out solely on the own initiative of the insured, independently of his employer or government;

(b) insurance claims on policies taken out with the sole purpose of obtaining a discount, even if those policies follow from a collective agreement.

4.87In order for an individual policy to be treated as part of a social insurance scheme, the eventualities or circumstances against which the participants are insured shall correspond to the risks or needs listed in paragraph 4.84, and, in addition, one or more of the following conditions shall be satisfied:

(a) participation in the scheme is obligatory either by law or under the terms and conditions of employment of an employee or group of employees;

(b) the scheme is a collective one operated for the benefit of a designated group of workers, whether employees, self-employed or non-employed, participation being restricted to members of that group;

(c) an employer makes a contribution (actual or imputed) to the scheme on behalf of an employee, whether or not the employee also makes a contribution.

4.88 Definition: social insurance schemes are schemes in which participants are obliged, or encouraged, by their employers or by general government, to take out insurance against certain eventualities or circumstances that may adversely affect their welfare or that of their dependants. In such schemes social contributions are paid by employees or others, or by employers on behalf of their employees, in order to secure entitlement to social insurance benefits, in the current or subsequent periods, for the employees or other contributors, their dependants or survivors.

Social insurance schemes are organised for groups of workers or are available by law to all workers or designated categories of workers, including non-employed persons as well as employees. They range from private schemes arranged for selected groups of workers employed by a single employer to social security schemes covering the entire labour force of a country. Participation in such schemes may be voluntary for the workers concerned, but it is more common for it to be obligatory. For example, participation in schemes organised by individual employers may be required by the terms and conditions of employment collectively agreed between employers and their employees.

4.89Two types of social insurance schemes may be distinguished:

(a) The first consists of social security schemes covering the entire community, or large sections of the community, that are imposed, controlled and financed by government units. Pensions payable under such schemes may or may not be related to levels of salary of the beneficiary or history of employment. Non-pension benefits are less frequently linked to salary levels;

(b) The second type consists of other employment related schemes. Such schemes derive from an employer-employee relationship in the provision of pension and possibly other entitlements that are part of the conditions of employment and where responsibility for the provision of benefits does not devolve to general government under social security provisions.

4.90Social insurance schemes organised by government units for their own employees as opposed to the working population at large are classified as other employment related schemes and not as social security schemes.

4.91 Definition: net social contributions are the actual or imputed contributions made by households to social insurance schemes to make provision for social benefits to be paid. Net social contributions (D.61) consist of:

employers' actual social contributions (D.611)

plus employers' imputed social contributions (D.612),

plus households' actual social contributions (D.613),

plus households' social contribution supplements (D.614),

less social insurance scheme service charges (D.61SC).

The social insurance scheme service charges are the service fees charged by the units administering the schemes. They appear here as part of the calculation for net social contributions (D.61); they are not redistributive transactions but part of output and consumption expenditure.

4.92Employers' actual social contributions (D.611) correspond to flow D.121.

Employers' actual social contributions are paid by employers to social security schemes and other employment related social insurance schemes to secure social benefits for their employees.

As employers' actual social contributions are made for the benefit of their employees, their value is recorded as one of the components of compensation of employees together with wages and salaries in cash and in kind. The social contributions are then recorded as being paid by the employees as current transfers to the social security schemes, and other employment related social insurance schemes.

This heading is split into two categories:

(a) employers' actual pension contributions (D.6111) corresponds to flow D.1211;

(b) employers' actual non-pension contributions (D.6112) corresponds to flow D.1212.

4.93Payments of actual social contributions may be compulsory by virtue of a statute or regulation, or they may be paid as a result of collective agreements in a particular industry or agreements between employer and employees in a particular enterprise, or because they are written into the contract of employment itself. In certain cases, the contributions may be voluntary.

Such voluntary contributions cover:

(a) social contributions paid by persons who are not legally obliged to contribute to a social security fund;

(b) social contributions paid to insurance enterprises (or pension funds classified in the same sector) as part of supplementary insurance schemes organised by enterprises for the benefit of their employees and which the latter join voluntarily;

4.94Time of recording: employers' actual social contributions (D.611) are recorded at the time when the work that gives rise to the liability to pay the contributions is carried out.

4.95Social contributions payable to the general government sector recorded in the accounts are derived from two sources: amounts evidenced by assessments and declarations or cash receipts.

(a) If assessments and declarations are used, the amounts shall be adjusted by a coefficient reflecting assessed and declared amounts never collected. As an alternative treatment, a capital transfer to the relevant sectors could be recorded equal to the same adjustment. The coefficients shall be estimated on the basis of past experience and current expectations in respect of assessed and declared amounts never collected. They shall be specific to different types of social contributions.

(b) If cash receipts are used, they shall be time-adjusted so that the cash is attributed when the activity took place to generate the social contribution liability (or when the liability is created). This adjustment may be based on the average time difference between the activity (or the creation of the liability) and cash receipt.

When retained at source by the employer, social contributions payable to the general government sector are included in wages and salaries irrespective of whether the employer passed them to the general government. The households sector is then shown as paying the full amount to the general government sector. The amounts actually unpaid are neutralised under D.995 as a capital transfer from general government to the employers' sectors.

4.96Employers' actual social contributions are recorded as:

(a) uses in the secondary distribution of income account of households;

(b) uses in the external account of primary incomes and current transfers (in the case of non-resident households);

(d) resources in the external account of primary incomes and current transfers (in the case of non-resident insurers or employers).

4.97 Definition: employers' imputed social contributions (D.612) represent the counterpart to social benefits (less eventual employees' social contributions) paid directly by employers (i.e. not linked to employers' actual contributions) to their employees or former employees and other eligible persons.

They correspond to flow D.122 as described under compensation of employees. Their value must be based on actuarial considerations, or on the basis of reasonable percentage of wages and salaries paid current employees or as equal to unfunded non-pension benefits payable by the enterprise during the same accounting period.

Employers' imputed social contributions D.612) is split into two categories:

(a) employers' imputed pension contributions (D.6121). They correspond to flow D.1221;

(b) employers' imputed non-pension contributions (D.6122). They correspond to flow D.1222.

4.98Time of recording: employers' imputed social contributions which represent the counterpart of compulsory direct social benefits are recorded in the period during which the work is done. Employers' imputed social contributions which represent the counterpart of voluntary direct social benefits are recorded at the time the benefits are provided.

4.99Employers' imputed social contributions are recorded as:

(a) uses in the secondary distribution of income account of households and in the external account of primary incomes and current transfers;

(b) resources in the secondary distribution of income account of the sectors to which the employers or resident insurers belong and in the external account of primary incomes and current transfers.

4.100 Definition: Households' actual social contributions are social contributions payable on their own behalf by employees, self-employed or non-employed persons to social insurance schemes.

Households' actual social contributions (D.613) are split into two categories:

(a) households' actual pension contributions (D.6131);

(b) households' actual non-pension contributions (D.6132).

Time of recording: households' actual social contributions are recorded on an accrual basis. For those in work, this is at the time when the work that gives rise to the liability to pay the contributions is carried out. For non-employed persons, this is at the time where the contributions are to be made.

In the system of accounts, households' actual social contributions are recorded:

(a) among uses in the secondary distribution of income account of households and in the external account of primary incomes and current transfers;

(b) among resources in the secondary distribution of income account of the sectors to which the employers belong and in the external account of primary incomes and current transfers.

4.101 Definition: households' social contribution supplements consist of the property income earned during the accounting period on the stock of pension and non-pension entitlements.

This heading is split into two categories:

(a) households' pension contribution supplements (D.6141);

(b) households' non-pension contribution supplements (D.6142). The heading D.6142 corresponds to households' contributions supplements related to social risks and needs other than pensions, such as sickness, maternity, industrial injury, disability, redundancy, etc.

Households' social contribution supplements are included in property income payable by the administrators of pension funds to households in the allocation of primary income account (investment income payable on pension entitlements D.442).

As this income is retained by the administrators of pension funds in practice, it is treated in the secondary distribution of income account as being paid back by households to pension funds in the form of households' social contributions supplements.

Time of recording: households' social contribution supplements are recorded when they accrue.

4.102The heading D.62 is made up of three sub-headings:

Social security benefits in cash (D.621);

Other social insurance benefits (D.622);

Social assistance benefits in cash (D.623).

4.103 Definition: social security benefits in cash are social insurance benefits payable in cash to households by social security funds. Reimbursements are excluded and treated as social transfers in kind (D.632).

Such benefits are provided under social security schemes.

They may be split between:

— social security pension benefits in cash (D.6211),

— social security non-pension benefits in cash (D.6212).

4.104 Definition: other social insurance benefits correspond to benefits payable by employers in the context of other employment related social insurance schemes. Other employment-related social insurance benefits are social benefits (in cash or in kind) payable by social insurance schemes other than social security to contributors to the schemes, their dependants or their survivors.

They typically include:

(a) the continued payment of normal, or reduced, wages during periods of absence from work as a result of ill health, accident, maternity, etc.;

(b) the payment of family, education or other allowances in respect of dependants;

(c) the payment of retirement or survivors' pensions to ex-employees or their survivors, and the payment of severance allowances to workers or their survivors in the event of redundancy, incapacity, accidental death, etc. (if linked to collective agreements);

(d) general medical services not related to the employee's work;

(e) convalescent and retirement homes.

Other social insurance benefits (D.622) may be split between:

— other social insurance pension benefits (D.6221),

— other social insurance non-pension benefits (D.6222).

4.105 Definition: social assistance benefits in cash are current transfers payable to households by government units or NPISHs to meet the same needs as social insurance benefits but which are not made under a social insurance scheme requiring participation usually by means of social contributions.

They therefore exclude all benefits paid by social security funds. Social assistance benefits may be payable in the following circumstances:

(a) no social insurance scheme exists to cover the circumstances in question;

(b) although a social insurance scheme, or schemes, may exist, the households in question do not participate and are not eligible for social insurance benefits;

(c) social insurance benefits are deemed to be inadequate to cover the needs in question the social assistance benefits being paid in addition;

(d) as a matter of general social policy.

Such benefits do not include current transfers paid in response to events or circumstances that are not normally covered by social insurance schemes (i.e. transfers made in response to natural disasters, recorded under other current transfers or under other capital transfers).

4.106Time of recording of social benefits other than social transfers in kind (D.62):

(a) in cash, they are recorded when the claims on the benefits are established;

(b) in kind, they are recorded at the time the services are provided, or at the time the changes of ownership of goods provided directly to households by non-market producers take place.

4.107Social benefits other than social transfers in kind (D.62) are recorded as:

(a) uses in the secondary distribution of income account of the sectors granting the benefits;

(b) uses in the external account of primary incomes and current transfers (in the case of benefits granted by the rest of the world);

(d) resources in the external account of primary incomes and current transfers (in the case of benefits granted to non-resident households).

4.108 Definition: social transfers in kind (D.63) consist of individual goods and services provided for free or at prices that are not economically significant to individual households by government units and NPISHs, whether purchased on the market or produced as non-market output by government units or NPISHs. They are financed out of taxation, other government income or social security contributions, or out of donations and property income in the case of NPISHs.

Services provided for free, or at prices that are not economically significant, to households are described as individual services to distinguish them from collective services provided to the community as a whole, or large sections of the community, such as defence and street lighting. Individual services consist mainly of education and health services, although other kinds of services such as housing services, cultural and recreational services are also frequently provided.

4.109Social transfers in kind (D.63) are subdivided into:

Social transfers in kind — general government and NPISHs non-market production (D.631)

Definition: social transfers in kind — general government and NPISHs non-market production (D.631) are individual goods and services provided directly to the beneficiaries by non-market producers. Any payments made by the households themselves should be deducted.

Social transfers in kind — market production purchased by general government and NPISHs (D.632)

Definition: social transfers in kind — market production purchased by general government and NPISHs (D.632) are individual goods and services

(a) in the form of reimbursements by social security funds of approved expenditures made by households on specific goods and services; or

(b) provided directly to the beneficiaries by market producers from which general government purchases the corresponding goods and services.

Any payments made by the households themselves are to be deducted.

When a household purchases a good or service for which it is subsequently reimbursed, in part or in whole, by a social security fund, the household can be regarded as if it were acting on behalf of the social security fund. In effect, the household provides a short-term credit to the social security fund that is liquidated as soon as the household is reimbursed.

The amount of the expenditure reimbursed is recorded as being incurred directly by the social security fund at the time the household makes the purchase, while the only expenditure recorded for the household is the difference, if any, between the purchaser's price paid and the amount reimbursed. Thus, the amount of the expenditure reimbursed is not treated as a current transfer in cash from the social security funds to households.

4.110Examples of social transfers in kind (D.63) are medical or dental treatments, surgery, hospital accommodation, spectacles or contact lenses, medical appliances or equipment, and similar goods or services meeting social risks or needs.

Other examples not covered by a social insurance scheme are social housing, dwelling allowance, day nurseries, professional training, reductions on transport prices (provided that there is a social purpose), and similar goods and services in the context of social risks or needs. Outside the scope of social risks or needs, when government provides individual households with goods and services such as recreational, cultural or sport services for free or at prices which are not economically significant, these are treated as social transfers in kind — government and NPISHs non-market production (D.631).

4.111Time of recording: social transfers in kind (D.63) are recorded at the time the services are provided, or at the time the changes of ownership of goods provided directly to households by producers take place.

Social transfers in kind (D.63) are recorded:

(a) among uses in the redistribution of income in kind account of the sectors granting the benefits;

(b) among resources in the redistribution of income in kind account of households.

The consumption of the goods and services transferred is recorded in the use of adjusted disposable income account.

There are no social transfers in kind with the rest of the world (they are registered in D.62 social benefits other than social transfers in kind).

OTHER CURRENT TRANSFERS (D.7)

Net non-life insurance premiums (D.71)

4.112 Definition: net non-life insurance premiums (D.71) are premiums payable under policies taken out by institutional units. The policies taken out by individual households are those taken out on their own initiative and for their own benefit, independently of their employers or government and outside any social insurance scheme. Net non-life insurance premiums comprise both the actual premiums payable by policy holders to obtain insurance cover during the accounting period (premiums earned) and the premium supplements payable out of the property income attributed to insurance policy holders, after deducting the service charges of insurance enterprises arranging the insurance.

Net non-life insurance premiums are the amounts available to provide cover against various events or accidents resulting in damage to goods or property, or harm to persons as a result of natural or human causes, examples being fires, floods, crashes, collisions, theft, violence, accidents, sickness, etc., or against financial losses resulting from events such as sickness, unemployment, accidents, etc.

Net non-life insurance premiums are split into two categories:

(a) net non-life direct insurance premiums (D.711);

(b) net non-life reinsurance premiums (D.712).

4.113Time of recording: net non-life insurance premiums are recorded when they are earned.

The insurance premiums from which the service charges are deducted are those parts of the total premiums, paid in the current period or previous periods, that cover risks outstanding in the current period.

Premiums earned in the current period must be distinguished from the premiums due for payment during the current period, which are likely to cover risks in future periods as well as the current period.

Net non-life insurance premiums are recorded as:

(a) uses in the secondary distribution of income account of resident policy holders;

(b) uses in the external account of primary incomes and current transfers (in the case of non-resident policy holders);

(d) resources in the external account of primary incomes and current transfers (in the case of non-resident insurance enterprises).

Non-life insurance claims (D.72)

4.114 Definition: non-life insurance claims (D.72) are the claims due under contracts in respect of non-life insurance, that is, the amounts which insurance enterprises are obliged to pay in settlement of injuries or damage suffered by persons or goods (including fixed capital goods).

This heading is split into two categories:

(a) non-life direct insurance claims (D.721);

(b) non-life reinsurance claims (D.722).

4.115Non-life insurance claims does not include payments which constitute social benefits.

The settlement of a non-life insurance claim is treated as a transfer to the claimant. Such payments are treated as current transfers, even when large sums may be involved as a result of the accidental destruction of a fixed asset or serious personal injury to an individual.

Exceptionally large claims, e.g. in the wake of a disaster, may be treated not as current transfers but as capital transfers (see point (k) of paragraph 4.165).

The amounts received by claimants are usually not committed for any particular purpose, and goods or assets which have been damaged or destroyed need not necessarily be repaired or replaced.

Claims arise because of damage or injuries that the policy holders cause to the property or persons of third parties. In such cases, valid claims are recorded as being payable directly by the insurance enterprise to the injured parties and not indirectly via the policy holder.

4.116Net reinsurance premiums and claims are calculated in exactly the same manner as non-life insurance premiums and claims. As the reinsurance business is concentrated in a few countries, most reinsurance policies are with non-resident units.

Some units, especially government units, may provide a guarantee against a debtor defaulting in conditions that have the same characteristics as non-life insurance. This happens when many guarantees of the same sort are issued and it is possible to make a realistic estimate of the overall level of defaults. In such cases, the fees paid (and the property income earned on them) are treated in the same way as non-life insurance premiums and the calls under the standardised loans guarantees are treated in the same way as non-life insurance claims.

4.117Time of recording: non-life insurance claims are recorded at the time the accident or other event insured against occurs.

They are recorded as:

(a) uses in the secondary distribution of income account of resident insurance enterprises;

(b) uses in the external account of primary incomes and current transfers (in the case of non-resident insurance enterprises);

(d) resources in the external account of primary incomes and current transfers (in the case of non-resident beneficiaries).

Current transfers within general government (D.73)

4.118 Definition: current transfers within general government (D.73) include transfers between the different subsectors of general government (central government, state government, local government and social security funds) with the exception of taxes, subsidies, investment grants and other capital transfers.

Current transfers within general government (D.73) do not include transactions on behalf of another unit; these are recorded only once in the accounts, in the resources of the beneficiary unit on whose behalf the transaction is made (see paragraph 1.78). This situation arises particularly when a government agency (e.g. a central government department) collects taxes which are automatically transferred, in total or in part, to another government agency (e.g. a local authority). In such cases, the tax receipts destined for the other government agency are shown as if they were collected directly by that agency and not as a current transfer within general government. The solution applies especially in the case of taxes destined for another government agency which take the form of additional rates superimposed on taxes levied by central government. Delays in remitting the taxes from the first to the second government unit give rise to entries under 'other accounts receivable/payable' in the financial account.

Transfers of tax receipts which form part of a block transfer from central government to another government agency are included in current transfers within general government. Such transfers do not correspond to any specific category of taxes and they are not made automatically but mainly through certain funds (county and local authority funds) in accordance with scales of apportionment laid down by central government.

4.119Time of recording: current transfers within general government are recorded at the time the regulations in force stipulate they are to be made.

4.120Current transfers within general government are recorded as uses and resources in the secondary distribution of income account of the subsectors of general government. Current transfers within general government are flows internal to the general government sector, and do not appear in a consolidated account for the sector as a whole.

Current international cooperation (D.74)

4.121 Definition: current international cooperation (D.74) includes all transfers in cash or in kind between general government and governments or international organisations in the rest of the world, except investment grants and other capital transfers.

4.122Heading D.74 covers:

(a) the contributions of the government to international organisations (excluding taxes payable by member governments to supranational organisations);

(b) current transfers which general government receive from the institutions or organisations referred to in point (a). Current transfers which the institutions of the European Union make directly to resident market producers are recorded as subsidies paid by the rest of the world;

(c) current transfers between governments, either in cash (e.g. payments intended to finance the budget deficits of foreign countries or overseas territories) or in kind (e.g. counterpart of gifts of food, military equipment, emergency aid after natural disasters in the form of food, clothing, medicines, etc.);

(d) wages and salaries paid by a government, an institution of the European Union or an international organisation, to advisers or technical assistance experts made available to developing countries.

Current international cooperation includes transfers between general government and international organisations located in the country, as international organisations are not treated as resident institutional units of the countries in which they are located.

4.123Time of recording: the time the regulations in force stipulate the transfers are to be made in the case of obligatory transfers, or the time the transfers are made in the case of voluntary transfers.

4.124Current international cooperation is recorded as:

(a) uses and resources in the secondary distribution of income account of the general government sector;

(b) uses and resources in the external account of primary incomes and current transfers.

Miscellaneous current transfers (D.75)

Current transfers to NPISHs (D.751)

4.125 Definition: current transfers to NPISHs include all voluntary contributions (other than legacies), membership subscriptions and financial assistance which NPISHs receive from households (including non-resident households) and, to a lesser extent, from other units.

4.126Current transfers to NPISHs include the following:

(a) regular subscriptions paid by households to trade unions and political, sporting, cultural, religious and similar organisations classified in the sector NPISHs;

(b) voluntary contributions (other than legacies) from households, corporate enterprises and the rest of the world to NPISHs, including transfers in kind in the form of gifts of food, clothing, blankets, medicines, etc. to charities for distribution to resident or non-resident households. Such treatment applies to consumption goods, as transfers of large gifts (valuables treated as non-financial assets) are recorded in other capital transfers (D.99) (see point (e) of paragraph 4.165). Gifts of unwanted or used articles from households are not recorded as transfers;

(c) assistance and grants from general government, other than transfers made for the specific purpose of financing capital expenditure, which are shown under investment grants.

Excluded from current transfers to NPISHs are payments of membership dues or subscriptions to market NPIs serving businesses, such as chambers of commerce or trade associations, which are treated as payments for services provided.

4.127Time of recording: current transfers to NPISHs are recorded at the time they are made.

4.128Current transfers to NPISHs are recorded as:

(a) uses in the secondary distribution of income account of the contributing sectors;

(b) uses in the external account of primary incomes and current transfers;

Current transfers between households (D.752)

4.129 Definition: current transfers between households (D.752) consist of all current transfers in cash or in kind made, or received, by resident households to, or from, other resident or non-resident households. In particular, they comprise remittances by emigrants or workers permanently settled abroad (or working abroad for a period of a year or longer) to members of their family living in their country of origin, or by parents to children in another location.

4.130Time of recording: current transfers between households are recorded at the time the transfers occur.

4.131Current transfers between households are recorded as:

(a) uses and resources in the secondary distribution of income account of households;

(b) uses and resources in the external account of primary incomes and current transfers.

Other miscellaneous current transfers (D.759)

Fines and penalties

4.132 Definition: fines and penalties imposed on institutional units by courts of law or quasi-judicial bodies are treated as other miscellaneous current transfers (D.759).

4.133The following are not included in other miscellaneous current transfers (D.759):

(a) fines and penalties imposed by tax authorities for the evasion or late payment of taxes, which cannot be distinguished from the taxes themselves and remain classified as taxes;

(b) payments of fees to obtain licences, such payments being either taxes or payments for services provided by government units.

4.134Time of recording: fines and penalties are recorded at the time the liabilities arise.

Lotteries and gambling

4.135 Definition: the amounts paid for lottery tickets or placed in bets consist of two elements: the payment of a service charge to the unit organising the lottery or gambling and a residual current transfer that is paid out to the winners.

The service charge may be substantial and cover taxes on the production of gambling services. The transfers are regarded in the system as taking place directly between those participating in the lottery or gambling, that is, between households. When non-resident households take part significant net transfers can arise between the households sector and the rest of the world.

Time of recording: residual current transfers are recorded at the time they are made.

Payments of compensation

4.136 Definition: payments of compensation consist of current transfers paid by institutional units to other institutional units in compensation for injury to persons or damage to property, excluding payments of non-life insurance claims. Payments of compensation are compulsory payments awarded by a court of law, or voluntary payments agreed out of court. This heading covers voluntary payments made by government units or NPISHs in compensation for injuries or damage caused by natural disasters other than those classified as capital transfers.

4.137Time of recording: payments of compensation are recorded when they are made (voluntary payments) or when they are due (compulsory payments).

4.138Other forms of other miscellaneous current transfers:

(a) current transfers from NPISHs to general government which are not taxes;

(b) payments by general government to public enterprises classified as non-financial corporate and quasi-corporate enterprises intended to cover abnormal pension charges;

(d) bonus payments on savings granted at intervals by general government to households in order to reward them for their saving during the period;

(e) the refunds by households of expenditure incurred on their behalf by social welfare organisations;

(f) current transfers from NPISHs to the rest of the world;

(g) sponsoring by corporations if those payments cannot be regarded as purchases of advertising or other services (for instance, transfers for a good cause, or scholarships);

(h) current transfers from general government to households in their capacity as consumers, if not recorded as social benefits;

(i) the counterpart transfer from the central bank to MFIs (S.122 and S.125) to cover the intermediate consumption of the non-directly allocated part of the output of the central bank (see Chapter 14: FISIM).

4.139Time of recording: the transfers listed in 4.138 are recorded when they are made, except those from or to general government, which are recorded when they are due.

Other miscellaneous current transfers appear as:

(a) resources and uses in the secondary distribution of income account of all sectors;

(b) resources and uses in the external account of primary incomes and current transfers.

VAT- and GNI-based EU own resources (D.76)

4.140 Definition: the VAT- and GNI-based third and fourth EU own resources (D.76) are current transfers paid by the general government of each Member State to the institutions of the European Union.

The VAT-based third EU own resource (D.761) and the GNI-based fourth EU own resource (D.762) are contributions to the budget of the Union institutions. The level of the contribution of each Member State is based on the levels of their VAT base and their GNI.

The heading D.76 also includes miscellaneous non-tax contributions of the government to the institutions of the European Union (D.763).

Time of recording: VAT- and GNI-based third and fourth own resources are recorded when they are due to be paid.

VAT- and GNI-based third and fourth own resources are recorded as:

(a) uses in the secondary distribution of income account of general government;

(b) resources in the external account of primary incomes and current transfers.

ADJUSTMENT FOR THE CHANGE IN PENSION ENTITLEMENTS (D.8)

4.141 Definition: the adjustment for the change in pension entitlements (D.8) represents the adjustment needed to make appear in the saving of households the change in the pension entitlements on which households have a definite claim. The pension entitlement change comes from contributions and benefits recorded in the secondary distribution of income account.

4.142Since households are treated in the financial accounts and balance sheets of the system as owning the pension entitlements, an adjustment item is necessary to ensure that any excess of pension contributions over pension receipts does not affect household saving.

In order to neutralise this effect, an adjustment equal to:

the total value of actual and imputed social contributions in respect of pensions payable into pension schemes in which households have a definite claim

plus the total value of contribution supplements payable out of property income attributed to pension schemes beneficiaries

minus the value of associated service charges

minus the total value of pensions paid out as social insurance benefits by pension schemes

is added to the disposable income, or adjusted disposable income, of households in the use of income accounts before arriving at saving.

In this way, the saving of households is the same as it would be had pension contributions and pension receipts not been recorded as current transfers in the secondary distribution of income account. This adjustment item is necessary in order to reconcile the saving of households with the change in their pension entitlements recorded in the financial account of the system. Opposite adjustments are, of course, needed in the use of income accounts of the units responsible for paying pensions.

4.143Time of recording: the adjustment is recorded according to the timing of the flows which compose it.

4.144The adjustment for the change in pension entitlements is recorded as:

(a) uses in the use of income accounts of the sectors in which the units responsible for paying pensions are classified;

(b) uses in the external account of primary incomes and current transfers (in the case of non-resident institutions);

(d) resources in the external account of primary incomes and current transfers (in the case of non-resident households).

CAPITAL TRANSFERS (D.9)

4.145 Definition: capital transfers require the acquisition or disposal of an asset, or assets, by at least one of the parties to the transaction. Whether made in cash or in kind, they result in a commensurate change in the financial, or non-financial, assets shown in the balance sheets of one or both parties to the transaction.

4.146A capital transfer in kind consists of the transfer of ownership of an asset (other than inventories and cash), or the cancellation of a liability by a creditor, without any counterpart being received in return.

A capital transfer in cash consists of the transfer of cash that the first party has raised by disposing of an asset, or assets (other than inventories), or that the second party is expected, or required, to use for the acquisition of an asset, or assets (other than inventories). The second party, the recipient, is obliged to use the cash to acquire an asset, or assets, as a condition on which the transfer is made.

The transfer value of a non-financial asset is valued according to the estimated price at which the asset, whether new or used, could be sold on the market plus any transport, installation or other costs of ownership transfer incurred by the donor but excluding any such charges incurred by the recipient. Transfers of financial assets are valued in the same way as other acquisitions or disposals of financial assets or liabilities.

4.147Capital transfers include capital taxes (D.91), investment grants (D.92) and other capital transfers (D.99).

Capital taxes (D.91)

4.148 Definition: capital taxes (D.91) consist of taxes levied at irregular and very infrequent intervals on the values of the assets or net worth owned by institutional units or on the values of assets transferred between institutional units as a result of legacies, gifts between persons, or other transfers.

4.149Capital taxes (D.91) include:

(a) taxes on capital transfers: inheritance taxes, death duties and taxes on gifts between persons, which are levied on the capital of the beneficiaries. Taxes on sales of assets are not included;

(b) capital levies: occasional and exceptional levies on assets or net worth owned by institutional units. These include betterment levies, that is taxes on the increase in the value of agricultural land due to planning permission to develop the land for commercial or residential purposes.

Taxes on capital gains are not recorded as capital taxes, but as current taxes on income, wealth, etc.

4.150Taxes recorded in the accounts come from two sources: amounts evidenced by assessments and declarations, or cash receipts.

(a) If assessments and declarations are used, the amounts are adjusted by a coefficient reflecting assessed and declared amounts never collected. As an alternative treatment, a capital transfer to the relevant sectors is recorded equal to the same adjustment. The coefficients are estimated on the basis of past experience and current expectations in respect of assessed and declared amounts never collected. They are specific to different types of taxes;

(b) If cash receipts are used, they are time-adjusted so that the cash is attributed to when the activity took place to generate the tax liability, or if this is not known, when the amount of tax was determined. This adjustment is based on the average time difference between the activity (or the determination of the amount of tax) and cash tax receipt.

4.151Capital taxes are recorded as:

(a) changes in liabilities and net worth (-) in the capital account of the sectors in which the taxpayers are classified;

(b) changes in liabilities and net worth (+) in the capital account of general government;

Investment grants (D.92)

4.152 Definition: investment grants (D.92) consist of capital transfers in cash or in kind made by governments or by the rest of the world to other resident or non-resident institutional units to finance all or part of the costs of their acquiring fixed assets.

Investment grants made by the rest of the world include those paid directly by the institutions of the European Union (e.g. transfers made by the European Agriculture Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD)).

4.153Investment grants in kind consist of transfers of transport equipment, machinery and other equipment by governments to other resident or non-resident units and also the direct provision of buildings or other structures for resident or non-resident units.

4.154The value of capital formation carried out by general government for the benefit of other sectors of the economy is recorded as investment grants whenever the beneficiary is identifiable and becomes the owner of the capital. In such cases, the capital formation is recorded as changes in assets in the capital account of the beneficiary and is financed by an investment grant which is recorded as changes in liabilities and net worth in the same account.

4.155Investment grants (D.92) include both lump sum payments designed to finance capital formation during the same period, and instalment payments in respect of capital formation carried out during an earlier period. Those parts of the annual payments by general government to enterprises which represent the amortisation of debts of enterprises undertaken for the purpose of government capital formation projects are treated as investment grants.

4.156Grants for interest relief made by general government are excluded from investment grants. The assumption by public authorities of part of the interest charges is a current distributive transaction. Nevertheless, when a grant serves the dual purpose of financing the amortisation of the debt contracted and the payment of the interest on the capital borrowed, and when it is not possible to separate these two elements, the whole of the grant is treated in the accounts as an investment grant.

4.157Investment grants to non-financial corporate and quasi-corporate enterprises include, in addition to grants to private enterprises, capital grants to public enterprises recognised as institutional units, provided that the government department which makes the grant does not retain a claim against the public enterprise.

4.158Investment grants to the households sector include equipment and modernisation grants to businesses other than corporate or quasi-corporate enterprises and grants to households for the construction, purchase and improvement of dwellings.

4.159Investment grants to general government include payments (except grants for interest relief) made to subsectors of general government for the purpose of financing capital formation. Investment grants within general government are flows internal to the general government sector and do not appear in a consolidated account for the sector as whole. Examples of investment grants within general government are transfers from central government to local government for the specific purpose of financing their gross fixed capital formation. Transfers intended for various indeterminate purposes are recorded as current transfers within general government, even if they are used to cover expenditure on capital formation.

4.160Investment grants to non-profit institutions from general government and from the rest of the world are distinguished from current transfers to non-profit institutions by using the criteria set out in paragraph 4.159.

4.161Investment grants to the rest of the world are restricted to transfers with the specific objective of financing capital formation by non-resident units. They include, for example, unrequited transfers for the construction of bridges, roads, factories, hospitals or schools in developing countries, or for constructing buildings for international organisations. They may comprise instalment payments over a period of time as well as single payments. This heading also covers the supply of fixed capital goods free of charge or at a reduced value.

4.162Time of recording: investment grants in cash are recorded when the payment is due to be made. Investment grants in kind are recorded when the ownership of the asset is transferred.

4.163Investment grants are recorded as:

(a) changes in liabilities and net worth (-) in the capital account of general government;

(b) changes in liabilities and net worth (+) in the capital account of the sectors receiving the grants;

Other capital transfers (D.99)

4.164 Definition: other capital transfers (D.99) cover transfers other than investment grants and capital taxes which do not themselves redistribute income but redistribute saving or wealth among the different sectors or subsectors of the economy or the rest of the world. They can be made in cash or kind (cases of debt assumption or debt cancellation) and correspond to voluntary transfers of wealth.

4.165Other capital transfers (D.99) include the following transactions:

(a) payments by general government or by the rest of the world to the owners of capital goods destroyed or damaged by acts of war, other political events or natural disasters (floods etc.);

(b) transfers from general government to non-financial corporate and quasi-corporate enterprises to cover losses accumulated over several financial years or exceptional losses from causes beyond the control of the enterprise (even in the case of a capital injection);

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