Financialinnovationseminarny2011[1]

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Financial Innovation

A Belgian approach in the heart of Europe

Thursday, June 23rd, 2011

SWIFT

Times Square

NY 10036

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“Financial Innovation, A Belgian Approach in the Heart of Europe”

Please turn off your cell phones !Thank you.

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Overview Programme “Financial Innovation, A Belgian Approach in the Heart of Europe”

Moderated by Robert Tortoriello, Partner at Cleary, Gottlieb,Steen and Hamilton

Welcome speechSteven Vanackere, Belgian Deputy Prime Minister and Federal Minister of Foreign Affairs and Institutional Reforms

Investing in the Belgian Financial SectorFilip Dierckx, Vice-Chairman of the Executive Board BNP Paribas Fortis Bank SA/NV, Vice-Chairman Febelfin

Unique tax incentives in BelgiumAlbert Wolfs, Head of the Fiscal Department for Foreign Investments (Belgian Ministry of Finance)

A relevant practical caseAndré Claes, Partner at Deloitte

Financial innovation in EuropeEileen Dignen, Managing Director, Banking Accounts and Initiatives, SWIFT Americas

US investment in Belgium, The Amcham perspectiveMarcel Claes, Chief Executive Officer at Amcham

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“Investing in the Belgian financial sector” Filip Dierckx, Vice-Chairman of the Executive Board BNP Paribas Fortis Bank SA/NV, Vice-

Chairman Febelfin

FebelfinJune 23, 2011

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• Belgian Financial Sector• ‘Financial Innovation’ Seminar

Agenda

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• Febelfin represents 236 financial institutions of which 105 banks including 6 US banks

• Consists out of 5 constituent associations

• Members are Banks, Asset Managers, Financial Niche players, Lease companies and Stock Brokers

• 9 members with special status

Febelfin, representing the Belgian Financial Sector

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Febelfin, representing The Belgian Financial Sector

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Belgium

In the heart of Europe

Home to European Institutions and NATO HQ

Open and well diversified economy

• GDP (PPP): $399 billion (30th worldwide)

• GDP - real growth rate: 2.1% (2010)

• GDP - per capita: $36,100 (18th worldwide)

• Harmonized unemployment rate: 8.4%

• Inflation rate (consumer prices): 2.3% (HICP)

Belgium, The Heart of Europe

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Belgium, The Heart of EuropeBelgium

2000 2001 2002 2003 2004 2005 2006 2007 2008 20090.0

10.020.030.040.050.060.070.080.090.0

100.0

Exports Euro AreaImports Euro Area

Export and imports account for more than 70% of GDP

• 8th largest exporter of goods worldwide

• 13th largest exporter of services in the world

Exports and imports of goods and services(% of GDP)

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Belgium, The Heart of EuropeBelgium Highly educated, multilangual and productive workforce

• Active population of 4.5 mio out of 10.8 mio total population

• Belgian workforce has one of the highest productivity rates in the EU

Overall productivity (GDP in PPS per person

employed relative to EU27, EU27=100)

Denmark

Germany

EU15

United Kingdom

Netherlands

France

Belgium

Luxembourg

0 20 40 60 80 100 120 140 160 180

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Key characteristics of the Belgian Financial Sector

The Banking Sector Number of banks established in Belgium(End of December 2010)

Open, international and diversified landscape

• 80% Foreign Banks of which majority

branches, 20% Domestic Banks

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Foreign Banks (85)

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Open, international and diversified landscape

• 80% Foreign Banks of which majority

branches, 20% Domestic Banks

• Large Market Share of Foreign Banks

The Banking Sector

Key characteristics of the Belgian Financial Sector

Share of foreign banks in the banking sector’s activities volume

(share in total bank assets, as a %, 2009)

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Open, international and diversified landscape

• 80% Foreign Banks of which majority

branches, 20% Domestic Banks

• Large Market Share of Foreign Banks

• Regional Decision Centres

The Banking Sector

Key characteristics of the Belgian Financial Sector

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Open, international and diversified landscape

• 80% Foreign Banks of which majority

branches, 20% Domestic Banks

• Large Market Share of Foreign Banks

• Regional Decision Centres

• High Credit to Deposit ratio

The Banking Sector

Key characteristics of the Belgian Financial Sector

Total bank credits as compared to total bank deposits (as a %, 2009)

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European comparison of the sector’s contribution to the economy – Total assets of the whole of credit institutions as

compared to the GDP (as a %, 2009)

Open, international and diversified landscape

• 80% Foreign Banks of which majority

branches, 20% Domestic Banks

• Large Market Share of Foreign Banks

• Regional Decision Centres

• High Deposit to Loan ratio

• Bank Assets to GDP ratio in line with

Eurozone average

The Banking Sector

Key characteristics of the Belgian Financial Sector

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Financial Crisis of 2008 and 2009 Economic Recession

International activities & exposure of Belgian financial sector

Financial Market Funding

Domestic Funding (Savings)

Domestic Lending (mortgages & corporate)

Balance restrictionSector adapts to crisis

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Euroclear number of transactions after netting (in millions, period figures)

Presence of World Class Centres of Excellence

World Class Centres of Excellence

• World player for settlement services

• Annual transactions worth more than

€500 trillion

• +2000 financial institutions as client

• Active in around 90 countries worldwide

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Average daily trafficMessages (millions)

Presence of World Class Centres of Excellence

World Class Centres of Excellence

• Worldwide Interbank Telecom services

• Serving +9000 banking organizations,

securities insitutions and corporate clients

• Active in +200 countries

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Inexpensive and Safe Payment Services

• Cost of retail bank amongst lowest in Europe

• Belgian payment landscape aligned to Single Euro Payment Area (SEPA)

7 out of 10 Belgians use Internet Banking

New Innovative payment applications

• Joint venture Banking and Telecom sector in progress

• Offering payment solutions for small amounts with near field technology

Belgium on top of payment solutions

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New Belgian financial architecture and EU supervision are being aligned

• Based on European model

• NBB &

Financial Services and Markets Authority

New Belgian financial architecture

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Thank you for your attention.

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“Unique tax incentives in Belgium”Albert Wolfs, Head of the Fiscal Department for Foreign Investments

(Belgian Ministry of Finance)

Foreign InvestmentsJune 23, 2011

Federal Public Service Finance

UNIQUE TAX INCENTIVESin BELGIUM

2011

Fiscal Department for Foreign Investments

Albert WOLFS

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Effective (Average) Corporate Tax Rate (ECTR) 2009*

Sources : Report 2009, made by ZEW (Centre for European Economic Research) for the EU CommissionProject : Taxud/2008/CC/099, Mannheim and Oxford, October 2009

*(based on asset and source of finance) Especially in Belgium, the ECTR is considerably below statutory tax rates (-9,3%)

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Effective (Average) Corporate Tax Rate (ECTR) 2009*

Sources : Report 2009, made by ZEW (Centre for European Economic Research) for the EU CommissionProject : Taxud/2008/CC/099), Mannheim and Oxford, October 2009

*(based on asset and source of finance) Especially in Belgium, the ECTR is considerably below statutory tax rates (-9,3%)

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www.invest.belgium.be

1. Notional Interest Deduction

2. Tax Ruling

3. Dividend withholding tax exemption

4. Holding regime

5. Other tax incentives

INVEST IN BELGIUM

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What is it?

A notional interest calculated and deducted yearly from the taxable basis

used to off-set operational or financial income (thus lowering effective tax rate)

1. Notional Interest Deduction

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Who?

Companies subjected to

- Corporate tax - Non-residents / Corporate Tax

1. Notional Interest Deduction

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How does it work ?

Annual Tax Deduction=

EQUITY X RATE (OLO 10 years)

1. Notional Interest Deduction

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EXAMPLE 1:

(Return on Equity: 4%)Assets Liabilities

Group Financing10,000

Share Capital10.000

P&L Account Before N.I.D. After N.I.D

Profit before tax 400 400

N.I.D. (3,425%) / - 342,5

Taxable 400 57,5

Corporate Tax (33,99 %) 135,96 19,5

Effective Tax Rate 33,99 % 4,89%

1. Notional Interest Deduction

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EXAMPLE 2:

Net Result(Return on Equity) Effective Tax Rate

≤ 3,425 % 0 %

4 % (Previous slide) 4,89 %

5 % 10,71 %

8 % 19,44 %

Assets Liabilities

Business Assets10,000

Share Capital10.000

1. Notional Interest Deduction

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« Qualifying » equity

Equity = total equity as defined under Belgian GAAP

(includes retained earnings)

in the opening balance sheet of the taxable period

“adjusted” to avoid double use and abuse.

1. Notional Interest Deduction

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Interest Rate RATE = annual average of the monthly published rates

of the long term Belgian Government Bonds (10-year OLO)

Fixed yearly for 2011 (Tax Year 2012) : 3,425 %

1. Notional Interest Deduction

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Other particularities

Permanent measure + 0,5% for SME’s Carry forward of 7 years No ruling nor agreement is needed Suppression of the 0,5% capital duty as of

1/1/2006 EU compliant

1. Notional Interest Deduction

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OPPORTUNITIES It’s a valuable tool for further development of Coordination

Centre activities

Opens possibilities for international groups of allocating new activities to a Belgian entity such as intra-group financing, central procurement or factoring

1. Notional Interest Deduction

THUS: increases attractiveness of Belgium for capital intensive companies, equity funded headquarters and treasury centers.

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Advanced decisions or ruling is about creating CONFIDENCE to invest in Belgium;

The investor describes the facts, allowing the tax administration to determine, in advance, how the tax laws are to be applied on a CASE BY CASE BASIS

It ensures a LEGALLY BINDING ACCURATE FORECAST of all the tax implications of your investment project

2. Tax Ruling

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2. Tax Ruling

Unlimited application field for ruling:

Transfer pricing Business Restructuring Deductible expenses Financing Branches Bonded warehouses, etc.

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3. Dividend withholding tax exemption

Parent company(treaty partner of Belgium)

Belgian Subsidiary

• No WHT

• No LOB

• 10% shareholding

• 12 months

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Participation exemption dividends received : deduction of 95%

Deductibility of interest paid to acquire shares

No capital duty

Exemption of realized capital gains on shares

4. Holding regime

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Tax treaty network (new favorable US-Belgium tax treaty)

Expat regime

R&D incentives

Bonded warehouses and VAT deferal

European pension funds

Tax shelter for audiovisual sector

Etc.,…

5. Other incentives

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Federal Public Service Finance Fiscal Department for Foreign InvestmentsRue de la Loi, 24 (Parliament Corner)1000 Brussels - BELGIUM

Albert WOLFSEmail: [email protected] Tel.: +32 257 938 67Fax: +32 257 951 12

Need to know more ?INVEST IN BELGIUM – increase your profits

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“A relevant practical case”André Claes, Partner at Deloitte

DeloitteJune 23, 2011

Tax Opportunities in BelgiumIllustration

June 23, 2011

Copyright © 2011 Deloitte Development LLC. All rights reserved.44

Introduction

• The purpose of this presentation is to illustrate various tax opportunities using a Belgian company.

• More in particular, we will illustrate through different practical cases the attractiveness of Belgium as:– a holding company location;– a finance company location;– IP company location;– a principal company location.

• Although envisaged separately in this presentation, those ideas could possibly also be combined.

Copyright © 2011 Deloitte Development LLC. All rights reserved.45

HoldingCo Case Study – Technology distribution company

Project / Need• European holding company project

Company profile• European HQ located in Belgium

What Belgium offered• Repatriation of dividends from European

subsidiaries to the US parent company at no WHT cost

• 1.7% tax rate on dividends received by Belco, effective tax rate possibly close to zero

• Deductibility of all expenses relating to the holding of the shares, including interest

US

European Sub

BelcoOperating &

holding activitiesFinance

company

Dividend

European Sub

Operating income

Interest

Loan

Dividend

Sale of shares

Copyright © 2011 Deloitte Development LLC. All rights reserved.46

FinCo Case Study – Technology Distribution company

Project / Need• Funding of European operations through

cash pooling

Company profile• Former Belgian Coordination Center

What Belgium offered• Offset of net interest income with notional

interest deduction (NID) allowing the cash pool leader to be taxed only on a spread, if any, between interest income and notional interest

• Repatriation of income to the US parent at no WHT cost

US

European Sub

Cash pool member

European Holdco

Finance company

Cash pool leader

European Sub

Cash pool member

Equity

Dividend

NID

Cash Pool

Copyright © 2011 Deloitte Development LLC. All rights reserved.47

IPCo Case Study – Highly innovative equipment manufacturer

Project / Need• Sale of self-developed patented technology

to third parties

Company profile• R&D developed in Belgium

What Belgium offered• Apply an 80% deduction on:

– royalty income

– deemed royalty income included in the sales price of products

• Repatriate dividends to the US parent at no WHT cost

US

Belgian IPCo

LicenseCost plus

remuneration

Royalties Sale

80% PID exemption

(un)related licensee

Low risk manufacturer

Clients

Sales price Sale

Copyright © 2011 Deloitte Development LLC. All rights reserved.48

Central Entrepreneur Case Study – Specialized software distributor

Project/ Need

• Central entrepreneur for Europe

Company profile

• Creation of a new business unit

• Belgium ranked within top 3 location by site selection analysis

What Belgium offered

• Excess accounting profit ruling allowing for the exemption of a substantial percentage of the residual profit of the business centralized into a central entrepreneur established in Belgium

• Repatriate dividends to the US parent at no WHT cost

Central Entrepreneur

Limited Risk Service

Providers

Service fee

US

Residual

Profit

About DeloitteDeloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.

Copyright © 2010 Deloitte Development LLC. All rights reserved.Member of Deloitte Touche Tohmatsu Limited

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“Financial Innovation in Europe”Eileen Dignen, Managing Director, Banking Accounts and Initiatives,

SWIFT Americas

FebelfinJune 23, 2011

The Financial Industry, SWIFT and InnovationBelgian Economic Mission in US Eileen Dignen

June 2011

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• Launch of Innotribe: Sibos 2009 Hong Kong

• Open innovation• Network of innovators

from across industries to explore the future of the financial industry and to co-create

• Community dialogue: www.swiftcommunity.net

• Cloud computing

• Vertical integration

• Open source

• Cyber security

• Networking

Key technology trends

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SWIFT and InnovationMission Deliverables

Critical success factors

Build the

SkillsToolsProcessesMetricsValue Network

required to support collaborative innovationand transform SWIFT in an agile company,able to succeed in a changing environment.

Facilitation & trainingProof of Concept

Enhance E2E development process

KPI / MonitoringCo-investment

Events

Frame of responsibilities changes over time

Senior management commitment to support and facilitate roll out

Adequate budget

Clear priorities translated in detailed project plans

Delivery tracked and impact measured

Solid programme management

Mandate for continuous communication on progress

time

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AdoptAdaptDemoTransfer54

Thank you

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“US investment in Belgium,the Amcham perspective”

Marcel Claes, Chief Executive Officer at Amcham

AmchamJune 23, 2011

The American Chamber of Commerce in Belgium

Why US Investment in Belgium is important and attractive?

June 2011

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• Founded in 1948 by IBM, JP Morgan, Kodak, GM

• 500+ company members: 1/2 US, 1/3 Belgian

• Membership led/funded non-profit organization

• Independent, i.e. no US or Belgian government subsidies

• Networking and knowledge sharing focused

• Issue driven: representing US business interests

American Chamber or Commerce in BelgiumIntroduction

…the undisputed leader to improve business and investment opportunities for the US-Belgian

business community

• More than 900 different US companies with approx. 1800 affiliates in Belgium,

• Many US companies with a large presence, also in financial services: BNY Mellon,

Citibank, State Street, MasterCard, NYSE Euronext, JP Morgan, but also SWIFT,

Euroclear, etc.

• Significant investments by many well known names: Ford, Exxon, P&G, Pfizer,

J&J, Baxter, DuPont, Google,

• Approximately 400 Headquarters of US companies

Belgium is an anchor point in the important Transatlantic relations

Belgium remains important destination for US Investment

• 75 billion Euros US Direct Investment-stock in Belgium

• After fast growth from 2004 to 2007, USDI inflows were lower in 2008

and 2009

• US investment has recovered significantly since 2009, expect to be in

record territory in 2010 and positive for 2011

• Direct employment of 130.000 people (2009),

• Approx. 300.000 employed including indirect jobs or over 10% of all

private sector employment in Belgium

US Investment in Belgium is important and recovered from crisis

US presence is still Manufacturing focused but growing services investments

• 70.000 US jobs in Belgium in wholly-owned affiliates of manufacturing based companies or over 50% of all US jobs

• Very strong US presence in certain sectors, e.g. over 50% of all pharma jobs in Belgium

• Manufacturing: over 1/3 of total US investments (in 2009)

- down from 52% in 1990, mainly because of rapid increase of financial services/investments

Growing services activity offers a lot of growth potential

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Belgium’s 3 regions have their own strengths• Flanders: has about 60% of the US investments

– Heavy concentration of manufacturing companies (automotive, chemical, pharma)

– Main logistic access: airport, harbors

• Brussels, as Belgian, Flemish and EU Capital and separate region attracts 25% of US investments

– Mostly Services and Headquarter operations

• Wallonia: about 15 % of US investment– Now starting to play its’ strengths: available, cheap and accessible

infrastructure (logistics), available high quality resources– Attracting some good new investments: Google (greenfield datacenter

€250 mio), Baxter, J&J, GSK …

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Top 10 reasons to invest in Belgium:• Central location in heart of Europe

• Cross and multi-cultural, multilingual• Highly educated, skilled an productive workforce• Capital of Europe, proximity to EU and Nato HQ• Attractive corporate tax regime with NID, very relevant for Financial Institutions and

company headquarters• Attractive regime to support Innovation and R&D• Competitive “effective” labor and other business conditions in spite of high nominal

charges and rates- many deductions• Top quality of life at reasonable cost• Attractive real estate• Specific cluster benefits in areas such as financial transaction processing: SWIFT,

Euroclear, Mastercard, BNY Mellon, etc

Belgium is Europe’s “best kept secret”

Contact Information

Marcel ClaesChief Executive

American Chamber of Commerce in Belgium

Handelsstraat 41 rue du Commerce

1050 Brussels

Tel +32/(0)2/289.10.81 Email: [email protected]

www.amcham.be

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Q&A