Reinvested Income

Reinvested income (also known as retained earnings ) is the third major component of direct investment flows , along with equity acquisitions and intra-corporate credit transactions .

They result from the consolidated profit of the foreign-controlled subsidiary (including its subsidiaries and branches) in a certain period after taxes minus the dividend payments due in the corresponding period to the foreign direct investor (= transferred income).

Reinvested earnings are purely fictitious transactions . The retained earnings are considered income that is paid out to investors and immediately reinvested.

Together with the dividends transferred to the direct investor, the reinvested income is also included in the capital income item in the current account .

source

OECD: Benchmark Definition of Foreign Direct Investment, 3rd Edition 1996, Paris.