I.          Foreign affiliates statistics (FATS)

The aim of the statistics on the structure and activity of foreign affiliates (Foreign Affiliates Statistics – FATS), which is compiled in accordance with Regulation (EU) No. 2019/2152 of the European Parliament and of the Council on European business statistics (see EBS Regulation) and Commission Implementing Regulation (EU) No. 2020/1197 laying down technical specifications and arrangements pursuant to Regulation (EU) 2019/2152 of the EP and of the Council (hereinafter also Data specification Regulation), is to inform about the role of foreign companies played in the domestic economy and about the role of Czech ultimate owners played abroad at the same time.

Depending on the group of enterprises it informs about, FATS statistics is divided into two subgroups, namely outward foreign affiliates statistics (Outward FATS – OFATS) – it monitors selected characteristics of enterprises resident abroad being under the domestic control, and inward foreign affiliates statistics (Inward FATS – IFATS) – it monitors domestic-resident enterprises being under the foreign control.

For selected range of indicators, it offers outputs for domestic enterprises broken down by the country of residence of the ultimate controlling institutional unit (so-called UCI) and industry on one side (IFATS) and by the country of residence of subsidiaries and industry on another side (OFATS). The concept of the ultimate owner is crucial in this case as it is represented by the subject (enterprise or natural person), that is not controlled by another subject in the control (ownership) chain.

Competences in relation to FATS statistics in the Czech Republic are divided between the Czech National Bank (CNB) and the Czech Statistical Office (CZSO). The CNB compiles data for OFATS (see Data specification Regulation, Table 33), while the CZSO compiles IFATS statistics (see Data specification Regulation, Table 14). Since reference year 2021, in connection with the new requirements of the EBS Regulation and subsequent regulations, the CZSO additionally compiles data on subjects under domestic control belonging to groups of enterprises that have at least one foreign affiliate, i.e. for a specific part of OFATS statistics (see Data specification Regulation, Table 15).

II.         Inward foreign affiliates statistics (IFATS)

II. 1.   Data sources and compilation

Monitored indicators are compiled from data on annual structural business statistics (task P 5-01), annual statistics on financial and insurance activities (tasks Pen 5-01, Poj 5a-01 and data available from surveys carried out by the CNB), annual statistics on non-profit institutions, housing cooperatives and selected institutions (NI 1-01), annual statistics on full labour costs (ÚNP 4-01) and statistics on research and development (task VTR 5-01). Information on the country of residence of the ultimate owner is ascertained, verified and updated using data from public sources (business registers, web presentations of affected groups of companies, register of multinational groups – EGR and economic news mediated by the media).

II. 2.   Output breakdown

In accordance with the FATS Regulation, one dataset is compiled on the inward foreign affiliates statistics. It is broken down in detail according to the prevailing economic activity in combination with selected, important countries of residence of the ultimate owner. Such countries include all EU member states, as well as Australia, Canada, Switzerland, China, Hong Kong, Israel, Iceland, Japan, Liechtenstein, Norway, New Zealand, the Russian Federation, Turkey, the United States and the aggregate in the form of offshore financial centres. At the same time, the dataset is broken down according to more than 230 countries in combination with smaller level of detail in the breakdown of economic activities (only the total sum in the form of aggregate BTSXO_S94). For OFATS, the CZSO also compiles one dataset, which is broken down in detail according to the prevailing economic activity and covers only domestic-controlled enterprises belonging to groups of enterprises that have at least one foreign affiliate.

Both the classification of economic activities (NACE Rev. 2) and the classification of countries for the purpose of determining the country of residence of the ultimate controlling institutional unit are standard classifications used in Eurostat’s statistics (for more information see FATS Manual).

II. 3.   Published indicators

II. 3.1. Indicators published in accordance with the European methodology

The indicators listed below are constructed in accordance with the Commission Implementing Regulation (EU) No. 2020/1197 laying down technical specifications and arrangements pursuant to Regulation (EU) 2019/2152 of the EP and of the Council on European business statistics repealing 10 legal acts in the field of business statistics (hereinafter also the Data specification Regulation).

Number of active enterprises – number of enterprises that have been active for at least a part of the reference period (see also the Data specification Regulation, indicator 210101).

Net turnover – sales of goods, products and services reduced by subsidies for the payment of costs and compensation of public service in passenger transport (see also the Data specification Regulation, indicator 250101).

Value of output – net turnover increased by subsidies to cover payment of costs and compensation of public service in passenger transport and revenue from the sale of material, reduced by the activation of non-current assets, the change in inventories of own activities and costs incurred for goods sold. The indicator is compiled from annual business statistics data and is not in line with any other national accounts’ macroeconomic indicator (see also the Data specification Regulation, indicator 250301).

Value added – net turnover increased by subsidies to cover payment of costs and compensation of public service passengers transport and revenue from the sale of material, reduced by the activation of non-current assets, the change in inventories of own activities, material sold, power consumption without financial leasing installments and selected items of other operating and financial costs. The indicator is compiled from annual business statistics data and is not in line with any other national accounts’ macroeconomic indicator (see also the Data specification Regulation, indicator 250401).

Total purchases of goods and services – sum of power consumption without financial leasing installments, the difference between final and initial stock levels of materials and goods, sold materials and selected items of other operating and financial costs (see also the Data specification Regulation, indicator 240101).

Purchases of goods and services for resale – sum of costs spent for goods sold and the difference between final and initial inventory level (see also the Data specification Regulation, indicator 240102).

Gross margin on goods for resale – the difference between sales of goods and purchases of goods for resale in the same condition as received (see also the Data specification Regulation, indicator 250201).

Employee benefits expense – sum of labour costs, social costs and other employee security costs (see also the Data specification Regulation, indicator 220301).

Number of employees and self-employed persons – average registered number of employees + number of owners and cooperating household members for whom work in the company has been the main activity + number of persons working on agreements on work performed outside the employment relationship converted into full time equivalents (see also the Data specification Regulation, indicator 220101).

II. 3.2. Ratio indicators

II. 3.2.1. Selected indicators of productivity

Production value per employed person – production value (for definition see II.3.1.) produced by one working person (for definition see II.3.1.).

Value added at factor cost per employed person – value added at factor cost (for definition see II.3.1.) per one working person (for definition see II.3.1.).

II. 3.2.2. Selected indicators of profitability

Return on assets – ratio of profit or loss before tax incl. interest expense to total assets; it means the overall efficiency of the business, i.e. how much profit the unit of assets will bring to an enterprise.

Return on sales – ratio of profit or loss after tax to sales; it means the availability of an enterprise to make profit at a given level of sales, i.e. how much profit the unit of sales will bring to an enterprise.

Return on costs – ratio of profit or loss after tax to total costs; it means how much profit the unit of costs will bring to an enterprise.

II. 3.2.3. Selected indicators of liquidity and net working capital

Current ratio – ratio of current assets to short-term liabilities; it means how many times an enterprise is able to satisfy creditors’ short-term claims in the case it converts all its current assets into cash.

Quick ratio – ratio of current assets reduced by inventories to short-term liabilities; it means how many times an enterprise is able to satisfy creditors’ short-term claims in the case it converts all its current assets reduced by the inventories into cash.

Net working capital – current assets reduced by current liabilities; it means how much operating funds will remain available after all short-term liabilities have been paid.

II. 3.2.4. Selected indicators of activity

Asset turnover – means the average number of days for which total assets are tied up in the business activity until their consumption.

Inventory turnover – means the average number of days before the inventories are converted into cash or receivables.

II. 3.2.5. Selected indicators of indebtedness

Debt ratio – ratio of liabilities to total assets; it means the degree of coverage of enterprise assets by its liabilities and thus characterizes the financial level of the company.

For methodological reasons, indicators listed in chapters II.3.2.2. – II.3.2.5. are compiled only as a subpopulation of legal persons.

II. 4.   Concepts and definitions

Inward foreign affiliates statistics monitors the economic activity of foreign affiliates resident in the compiling country.

Foreign affiliate in the context of inward foreign affiliates statistics represents an institutional unit (definition of an institutional unit, see 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), which is resident in the IFATS compiling country and is under the control of another institutional unit not resident in the same country. In the case of the Czech Republic, these are domestic companies controlled from abroad.

Control means usually the direct or indirect control of more than a half of the voting rights or more than a half of the shares of the company (see also FATS manual, chapter I.1.1.2).

Foreign control means that the ultimate controlling institutional unit is resident in another country than the controlled institutional unit.

Concept of ultimate ownership – to determine the country from which the control of a particular enterprise is carried out, the identification of the ultimate controlling institutional unit (UCI) is the key. The UCI is defined as an institutional unit being at the top of the ownership chain and not being under the control of any other institutional unit. The concept of real decision centre is crucial. Many enterprise groups have a purely formal head at the top of their ownership structure without real economic activity. Such units are called ‘empty shells’ and they are most often set up for tax optimization reasons. Therefore, many Czech groups have their formal heads in Cyprus or in the Netherlands, but they are actually controlled from the Czech Republic (see also FATS manual, chapter I.1.1.5).

Statistical population – IFATS statistics represents an extension of annual structural statistics (SBS). Therefore, it describes the same part of the economy comprising market activities classified according to NACE Rev. 2 classification of economic activities into sections B to N, P to R and divisions S95 + S96. From the subjects’ point of view, they include non-financial corporations (including housing cooperatives), financial corporations and natural persons engaged in business activity.

Reference period – data are compiled for a calendar year that corresponds to a fiscal year in the vast majority of the cases.

Time coverage – data are available from 2007 in accordance with the FATS Regulation and commonly published for the reference year 2012.

Institutional mandate – By Regulation (EU) No. 2019/2152 of the European Parliament and of the Council of 27 November 2019 on European business statistics, repealing 10 legal acts in the field of business statistics (see EBS Regulation) and by the Commission Implementing Regulation (EU) No. 2020/1197 of 30 July 2020 laying down technical specifications and arrangements pursuant to Regulation (EU) 2019/2152 of the European Parliament and of the Council on European business statistics repealing 10 legal acts in the field of business statistics (see Data specification Regulation).

Statistical confidentiality – in accordance with The Act No. 89/1995 Coll., on the State Statistical Service, as amended (see The State Statistical Service Act) and the CZSO’s internal regulations, methods ensuring protection of confidential data are applied to published data.

In cases of statistical confidentiality, i.e. when the contribution of a particular unit to published data can be determined, a confidentiality flag is placed in the relevant data cell. Such cells are published without a numeric value, but only with the appropriate symbol (i.d.). Also, all other data cells that could be used to derive the value of the confidential data cell indirectly are marked as confidential and published with the same symbol. These cells are identified and marked during secondary confidentiality processing.

II. 5.   Retrospective corrections and revisions

In accordance with the requirements of the FATS Regulation, the required data are transmitted to Eurostat within 20 months after the end of the reference period.

If necessary, in connection with the structural business statistics (SBS), it is possible to carry out an extraordinary data revision for previous reference period at the date of data transmission for the last reference period.

II. 6.   Year-on-year comparability

Year-on-year comparability of published time series is affected by the extent of available relevant information which changes over time (e.g. the existence of the register of multinational enterprise groups – EGR), by the population size of verified units and available capacities for verifying the information on the countries of residence of the ultimate controlling institutional units.

With the reference year 2009, the population of enterprises (for which the country of residence of the ultimate controlling institutional units is ascertained, verified and updated) was expanded to include the population of natural persons engaged in business activities. Due to the large number of natural persons and their small importance in terms of indicators monitored by IFATS statistics (except for Number of enterprises indicator), methodological procuration has been adopted since the reference year 2011 determining all natural persons engaged in business activities being considered domestic-controlled subjects. It is based on the assumption that if a person with foreign citizenship actively does business in the Czech Republic as a self-employed person, in the vast majority of cases such a person stays here for the most of the year and is considered a tax resident of the Czech Republic from the point of tax legislation view.

With the reference year 2017, there was a significant change in the organization of work in identifying the country of residence of the ultimate controlling institutional unites which allowed an increase in the number of the verified units compared to the past.

The above-mentioned methodological interventions always concerned the smallest subjects with the limited influence on the published aggregates. Therefore, the comparability of other indicators, apart from Number of enterprises indicator, is affected only minimally.

With the EBS Regulation, in addition to the change of name, minor adjustments in the definitions of several indicators came into force since the reference year 2021. The adjustments do not have a significant impact on the comparability of published data over time. Data since the reference year 2021 published on the CZSO’s website covers the same range of NACE Rev. 2 as before the reference year 2021.

II. 7.   International comparability

For the area of statistics on the structure and activity of foreign affiliates, Regulation (EU) No. 2019/2152 of the European Parliament and of the Council of 27 November 2019 on European business statistics, repealing 10 legal acts in the field of business statistics (see EBS Regulation) supplemented by the Commission Implementing Regulation No. 2020/1197 of 30 July 2020 laying down technical specifications and arrangements pursuant to the Regulation (EU) 2019/2152 of the European Parliament and of the Council on European business statistics repealing 10 legal acts in the field of business statistics. The indicators published by the CZSO are fully internationally methodologically comparable.

II. 8.   Consistency with other surveys

Due to the compilation method, the published results are fully consistent with structural business statistics and R&D statistics.

The indicators of IFATS statistics are compiled from annual business statistics data, therefore they are not in the methodological consistency with macroeconomic data, e.g. national accounts.

III. Additional information and links

Eurostat: time series published (IFATS, OFATS)

Eurostat: Foreign Affiliates Statistics (FATS) Recommendations Manual

Eurostat: Foreign Affiliates Statistics (FATS) Recommendations Manual – updated appendix