Item 12: Property Income ESTP course on National Accounts ESA 2010 Luxembourg, 15 May - 19 May 2017 Eurostat

Property Income (D.4): ESA2010: definition (para: 4.41) "Property income (D.4) accrues when the owners of financial assets and natural resources put them at the disposal of other institutional units. The income payable for the use of financial assets is called investment income, while that payable for the use of a natural resource is called rent. Property income is the sum of investment income and rent."

Property income (D.4): types D.41 - Interest D.42 - Distributed income of corporations D.43 - Reinvested earnings on Foreign Direct Investment D.44 - Other investment income D.45 - Rents (of land)

D.41 Interest Payable on various financial assets - deposits, bonds, loans, trade credits etc. Recorded on an accruals basis (continuously) Interest flows must be netted of FISIM, it is recognized in the system a service thus must be eliminated from interest (see agenda item on FISIM)

D.41 Interest Recording: Sources: Only bilateral flows between financial sector and other sectors Sources: Banking statistics from regulators & supervisors

D.42 Distributed income of corporations Profits distributed to shareholders *Dividends and ‘dividends’ of quasi-corporations Payers: corporations, ROW Recipients: owner sector (i.e. anyone) Sources: business surveys, stock exchange, income tax

D.43 Reinvested earnings on FDI Features: imputed, international flow FDI vs. portfolio investment RIE = undistributed profits Recorded from ROW to national owners (and viceversa) Re-invest through Financial Account

D.43 Reinvested earnings Calculation in practice: 1. Identify FDI enterprises 2. Calculate their profits 3. Estimate their dividends and other distributed income 4. RIE = profits – dividends (more, see the dedicated exercise on RIE)

D.44 - Other investment income D.441 - Investment income attributable to insurance policyholders D.442 - Investment income payable on pension entitlements D.443 - Investment income attributable to investment funds shareholders

D.441 Investment income attributable to insurance policyholders Imputed flow from insurers to policyholders Policyholders send money back as service charge D.441 premiums investment

D.442 Investment income payable on pension entitlements Two types of pension schemes: Defined contribution scheme - contributions paid by employers and employees are invested on behalf of the employees as future pensioners Defined benefit scheme - a formula is used to determine the level of payments to pensioners (present value of all future payments)

D.443 Investment income attributable to investment funds shareholders The dividends on funds shares are recorded in exactly the same manner as dividends for individual corporations 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.

D.45 Rents Rents of land and subsoil assets: Why rents ≠ renting? Coal, minerals Petrol, gas,… Why rents ≠ renting? Because no maintenance, no activity needed!