4.64 Definition:
Reinvested earnings on direct foreign investment (D.43) are equal to:
the operating surplus of the direct foreign investment enterprise
plus any property incomes or current transfers receivable
minus any property incomes or current transfers payable, including actual
remittances to foreign direct investors and any current taxes payable on the income,
wealth, etc., of the direct foreign investment enterprise.
4.65
A direct foreign investment enterprise is an incorporated or unincorporated
enterprise in which an investor resident in another economy owns 10 per cent or
more of the ordinary shares or voting power (for an incorporated enterprise) or
the equivalent (for an unincorporated enterprise). Direct foreign investment
enterprises comprise those entities that are identified as subsidiaries (investor
owns more than 50 per cent), associates (investor owns 50 per cent or less)
and branches (wholly or jointly owned unincorporated enterprises), either
directly or indirectly owned by the investor. Consequently, 'direct foreign investment enterprises' is a broader concept than 'foreign controlled corporations'.
4.66
Actual distributions may be made out of the entrepreneurial income of direct
foreign investment enterprises in the form of dividends or withdrawals of income
from quasi-corporations.
In addition, retained earnings are treated as if they were distributed and
remitted to foreign direct investors in proportion to their ownership of the
equity of the enterprise and then reinvested by them.
Reinvested earnings on direct foreign investment can be either positive or
negative.
4.67
Time of recording: Reinvested earnings on direct foreign investment are
recorded when they are earned.
In the system of accounts, reinvested earnings on direct foreign investment
appear: