Revenue 109
5.130 General government units may grant leases
to other institutional units that permit them to extract
these deposits over a specifi ed period of time in return
for a payment or series of payments. Th ese payments
are oft en described as “royalties,” but they are essen-
tially rent that accrues to owners of natural resources
in return for putting these assets at the disposal of
other units for specifi ed periods of time. Th e rent may
take the form of periodic payments of fi xed amounts,
irrespective of the rate of extraction, or, more com-
monly, they may be a function of the quantity, volume,
or value of the asset extracted. Enterprises engaged in
exploration on government land may make payments
to general government units in exchange for the right
to undertake test drilling or otherwise investigate the
existence and location of subsoil assets. Such pay-
ments are also recorded as rents even though no ex-
traction may take place.
Boundary with rental of produced assets
5.131 Rent should not be confused with the rental
of produced assets, which is recorded as sales of goods
and services (142).^37 Rentals are payments made under
an operating lease to use a fi xed asset belonging to a
unit where the owner maintains and replaces as nec-
essary, and makes available the fi xed asset on demand
to lessees. Th e diff erence in treatment arises because
lessors of produced assets are engaged in a production
process whereby they provide services to the lessees,
such as maintaining inventories of fi xed assets avail-
able for lease at short notice and repairing and main-
taining the leased assets. In particular, the rentals
payable by government units as tenants are recorded
as payments for the provision of building or housing
services. Rent is revenue receivable by owners of natu-
ral resources for placing these assets at the disposal of
other units.
5.132 A single payment may cover both rent and
rentals when an institutional unit rents land that con-
sists of land improvements and land and buildings
situated on the land in a single contract, or lease, in
which the two kinds of payments are not diff erenti-
ated from each other. If there is no objective basis on
which to split the payment between rent on land and
rental on the produced assets, it is recommended to
(^37) Th e rentals paid by tenants of buildings are treated as payments
for the provision of real estate activities or housing services.
treat the whole amount as rent when the value of the
land is believed to exceed the value of the buildings
and other produced assets, and as a rental otherwise.
Boundary with taxes
5.133 Rent should also not be confused with sever-
ance taxes, business licenses, or other taxes. Severance
taxes are imposed on the extraction of minerals and
fossil fuels from reserves owned privately or by an-
other government. If the payment counts toward the
taxes on profi ts, then it should be classifi ed as taxes
on income, profi ts, and capital gains (111). Payments
related to the gross value of production should be
classifi ed as other taxes on goods and services (1146).
Payments for a license or permit to conduct extrac-
tion operations should be classifi ed as taxes on use of
goods and on permission to use goods or perform activi-
ties (1145).Reinvested earnings on foreign direct investment (1416)
5.134 Reinvested earnings are the direct inves-
tor’s share of the retained earnings of the direct in-
vestment^38 enterprise. A general government unit or
public corporation may have foreign direct invest-
ment in nonresident special purpose entities (SPEs),
or nonresident branches or subsidiaries of public cor-
porations. Actual distributions receivable from such
nonresident units out of their distributable income
should be recorded as dividends (1412) or withdrawals
of income from quasi-corporations (1413). In addition,
these entities may have retained some of their earn-
ings. Retained earnings of a corporation or quasi-cor-
poration are equal to the distributable income^39 minus
the dividends payable or withdrawal of income from
the corporation or quasi-corporation, respectively.
5.135 Retained earnings of a foreign direct invest-
ment enterprise are to be recorded as if they were
distributed to foreign direct investors in proportion
to their ownership of the equity of the enterprise and
then reinvested by them.^40 Th e imputed remittance(^38) Direct investment is a category of cross-border investment
associated with a resident in one economy having control or a sig-
nifi cant degree of infl uence on the management of an enterprise
that is resident in another economy (see the BPM6, paragraphs
6.8 and 11.40–11.47).
(^39) Distributable income is discussed in paragraph 5.116.
(^40) See paragraph 10.33 for the treatment of retained earnings of
other corporations.