the kpmg difference - november 2013 (in english)

Milkfiber A unique product

SUSTAINABLE INNOVATION

Belgian Companies

Invest in Innovation

Physical Asset Management

The Cumulative Impact of

Regulation

Beyond the Suits

KPMG DifferenceTh

e

Magazine / November 2013

2 | The KPMG Difference | noveMber 2013

What if textiles get a fresh start thanks to...milk?

It’s surprising but true. Milk fibers are a sustainable solution and provide new

opportunities for economic growth. Shirts made of milk fiber will be a reality in the near future.

Is your company currently facing a transformation?

Regardless of your sector, our specialists provide a multidisciplinary approach to help

you efficiently identify and manage your Mergers & Acquisitions

and Restructuring opportunities.

Learn more at kpmg.com/be/milkfiber

04 Word from our CEO

05 Milk Fibers in Numbers

06 The Cumulative Impact of Regulation

08 Physical Asset Management

10 Global Mergers & Acquisitions Predictor

12 The Woman Behind the Fiber

16 The “Making Of” Milk Fiber

17 Belgian Companies Invest in Innovation

18 Technical Perspectives from Tax

20 Beyond the Suits

22 Bookshelf

24 Meet and Greet

25 The Last Word

26 KPMG Expertise

ContentsNovember 2013

This magazine and all of KPMG’s Thought Leadership can be accessed by using the KPMG app.

responsible editor: Patrick Simons,Avenue du bourget bourgetlaan 40, 1130 brussels

The KPMG dIfferenCe

16

12

20

10


This special first edition of The KPMG Difference will provide the most recent insights from our leading experts based on the five key KPMG attributes: expert, global mindset, forward thinking, value-adding and passionate.

The world is constantly and rapidly changing. Dealing with complexity has become a way of life. The evidence is in the unprecedented amount of regulatory change, in the shifting political and economic climate, in the rapid growth of some industries and shrinkage or complete disappearance of others, and in the light-ning-speed evolution of technology.

Predictability is a thing of the past… adaptability is the way of the future. Many industries are having to learn to adapt their entire business models or service offerings in order to survive and will need to continually adjust to stay competitive in the future.

Finding trusted and reliable advisors who can help people and organizations adapt and succeed has become a business and personal imperative. Here at KPMG, we are dedicated to providing you with the advisory, tax and audit services you can count on. We are here to help you grow your business, address your risk environ-ment and improve your performance.

And we want to share this with you through a story; a story that tells how KPMG can help companies with their transformation. The story is about MILK FIBERS, an innovative and sustainable transformation that is one of the many tangible and innovative evolutions that characterizes our changing world. Anke Domaske, a scientist-fashion designer turned entrepreneur developed this environmen-tally sound alternative and by transforming milk waste into thread, she created a whole new value chain from farmer to consumer.

Milk fibers are a tangible example of the quickly changing world in which KPMG continues to lead. Our capabilities, our knowledge, our approach, our expertise and our experience can help you succeed. We are here to help you work smarter and not harder.

In this special edition we include: a groundbreaking study from our Financial Services team on the cumulative impact of regulations on the Belgian economy, current Merger & Acquisitions trends, insights on the opportunity to leverage real value from your physical assets and a tax update including the new fairness tax.

These stories highlight what our experts are thinking on the latest emerging trends and how they can support you during your transformation regardless of where in the process you may be …

enjoy.

embracing Transformation

PaTrICK SIMonSSenior Partner KPMG in Belgium

Milk fibers are a tangible example of the quickly changing

world in which KPMG continues to lead”

edITorIaL

November 2013 | THe KPmG DIFFereNCe | 5

1

5 The number of people on the research team 2

3,255,620,000

Milk fibersin Numbers

The water demand gap predicted for

20301

40%

liters of milk produced in Belgium (2011)3

1.4 kgthe amount of waste produced per person per day in europe (2010)2

6

1930

The number of liters of waste milk saved to produce one dress

The year the original version of milk fibers was developed2

2 The number of years it took to develop the ecological version of milk fibers2

1The number of

hours it takes to create fabric from

milk2

1 United Nations Environment Program (UNEP). (2011). Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication. UNEP, Nairobi.

2 Domaske, Anke. (April 2013). Telephone interview.3 Rapport Annuel. (2012). Assemblé Générale de la

Confédération Belge de l’Industrie Laitière, Leuven.

a quick look at the numbers tells us a lot about milk fibers’ innovative approach and how they can help address macroeconomic challenges today and into the future.

The number of liters of water it takes to produce 900 grams of fabric2

TruSTed advISor CaMPaIGn


exPerT

The reaction to the finan-cial crises has been similar around the world. Global, european and national

legislators and authorities have introduced a large number of new regulations and new taxations. The objective has been to make the banking sector more stable and reduce risks. Undoubtedly these new regulations/taxations have a significant impact on the way banks can continue to fulfill their core function.

In light of these regulatory changes and in an effort to provide clarity on their impact, KPMG decided to analyze the effects, qualitatively and quantitatively, for the Belgian banking sector.

KPMG identified a total of 31 focus areas of new regulations/taxations that, in the after-math of the financial crises, have been, or soon will be, introduced in Belgium. The implications range from capital and liquidity requirements to corporate governance, from derivatives to the design of retail products, and from resolution to remuneration.By analyzing the different impact areas of new regulations/taxations through a qualitative survey of major Belgian bank managers, it was concluded

that many reforms go further than mere compliance. Regulations also have significant impacts on the finan-cial situation (balance sheet and income statement), on the business model, on the operating model and on the change capacity of banks.The quantitative analysis focused on

CRD IV/Basel III; the Belgian Deposit Guarantee Scheme and other Belgian Bank Contributions (Stability contribution, ‘Loan-to-deposit’ tax, ‘Abonnement’ tax); the Financial Transaction Tax and Bail-in debt (crisis management frame-work); the regulations expected to have the biggest impact on bank’s financial situation (bal-ance-sheet and income statement); and those that are sufficiently quantifiable.

It will naturally be up to each bank to determine the measures it deems best suited to address its challenges. however, this study shows that, gen-erally speaking, Belgian banks are most likely to opt for a combination of actions that will focus on their return on equity and cost/income ratio, i.e. cost cutting, re-pricing loans, re-pricing ‘debts to clients’ and extra non-interest income generation.In order to achieve an average sector return of 8% on equity by 2016, the study deems the fol-lowing mix of measures to be realistic1:

KPMG decided to analyze the effects of the current regulatorychanges in an effort to provide clarity on their impact, bothqualitatively and quantitatively, on the Belgian banking sector.The implications range from capital and liquidity requirementsto corporate governance, from derivatives to the design of retailproducts, and from resolution to remuneration.

The Cumulative

Impact of Regulation

The number of focus areas of new regulations/taxations that have been, or soon will be, introduced in Belgium.

31

expert – KPMG offers clear insights based on deep expertise.


• a structural net cost reduction of 10% achieved in year one;

• extra non-interest income (fee business) gener-ated at a rate of 2.5% per year;

• re-pricing of ‘debts to clients’ by 25 basis points (assuming 30% of the portfolio is re-priced each year);

• re-pricing of loans by 70 basis points (assuming 10% of the portfolio is re-priced each year); and

• ‘liquidity transformation of assets’ (from non-liq-uid to liquid assets) for an amount of eUR 5.5bn applied in 2013.

This combined scenario highlights the fact that new regulations that reduce risks and have a positive effect on the stability of the bank-ing sector, have adverse effects on profitability and access to capital. Consequently, it comes at the cost of stimulating the economy. At the same time, more stability contributes to a fertile

business climate and increased public confi-dence in the industry.It is fair to say that globally we have reached a point where we need to re-evaluate the cost/benefit relationship of additional regulations. This leads to a key question: If (as research shows), there is an indexation-point where the negative impacts begin to exceed the benefits, have we reached that point?

The different stakeholders in the debate (political, financial, customers and supervisors) should take into account the cumulative impact of the multiple reform initiatives and of the uncertainty surround-ing the many unresolved items on the regulatory agenda. Stakeholders must be conscious that additional regulation is not a ‘free good’.

1 Clearly this is not the only possible combination but one that seemed most realistic based on the results of the sounding boards.

new regulations that have a positive effect on the stability of the banking sector, have adverse effects on profitability and access to capital.


Global asset Management

Competence Center

Meet the driving force behind KPMG’s Global Asset Management Competence Center (AMCC), Daniël Pairon. Daniël is a Partner at KPMG

and the founder of the KPMG Global AMCC, located in Brussels, and he believes in the power of companies to manage their physical assets (like utilities, public infrastructure, but also pro-cess industries) to leverage specific value for their businesses, and he has the data, expertise and a great team to help them achieve it. As a pioneer of this increasingly sought-after service and the only big-four company in the world that is a patron of the Institute of Asset Management and with certified PAS 55 auditors, KPMG’s experience is unparalleled.

Physical Asset Management is something still rather new. In fact, the ISO standards for the pro-cess are only just being finalized (expected release by early 2014). The KPMG Global AMCC has been actively involved in drawing up this new standard, with specific attention to financial-technical repor-ting, transparency and asset risks and control management.

Daniël Pairon, a leading voice in the discussions to create these standards explains, “Companies often see Physical Asset Management as a small part of maintenance. But a specific Physical Asset Management strategy can mean significant bene-fits for companies, the data speak for themselves.”

Research from a recent study1 showed that $1 trillion is the annual savings available from a 60 percent improvement in infrastructure productivity. Identifying key areas for these improvements is clear when we know that: four years is the average

time it takes to obtain full permission to construct a power plant in europe and that there are poten-tial savings upwards of 15% available simply from streamlining infrastructure delivery or reprioritizing projects and picking more cost-effective alterna-tives. All this potential is wasted, as Belgian com-panies involved in airports, railways, pipelines, etc. have been less than energetic in implementing a sound Asset Management strategy.

Getting Board meeting agendas to include ma na-ging the entire asset life cycle is at the fore-front of the Asset Management Competence Center’s vision. Asset owners in Belgium need to take action now. Not only does Physical Asset Management prepare for the challenges of cli-mate change, increasing population density and shrinking resources, it is part of the new holistic approach to business that can help companies improve their bottom line today and far into the future.

Daniël Pairon can count on a wonderful team of passionate experts in Physical Asset Management. each member of the team brings his or her unique perspective (financial, opera-tional and technical). This global AMCC team has contributed to the development of a unique soft-ware, which they apply across many industries to support companies, as they strive to optimize and achieve maximum possible benefits from Physical Asset Management. When these strate-gies are well applied, the likely positive impact is far reaching, affecting a company’s financial results, its reputation, its green footprint and its community impact.

1 Infrastructure productivity: how to save $1 trillion a year. (Ja-nuary 2013). McKinsey & Company. McKinsey Global Institute.

A physical asset is a material item with an economic value such as cash, equipment, inventory and properties owned by the business. Asset-intensive industries: the utilities sector (e.g. power generation, water treatment), as well as the infrastructure sector (e.g. motorways, airports, trains).

forWard ThInKInG

Daniël Pairon

“Companies often see Physical asset Management as a small part of maintenance. But a specific Physical asset

Management strategy can mean significant benefits for companies, the data speak for themselves.”


PuTTInG The aMCC To WorK

ContextA listed global science-based company asked the KPMG Global Asset Management competence center for help in improving its equipment reliability processes. The goal of the project was to minimize the total oper-ating cost of assets based on its business Strategy and to reduce the maintenance related production losses (reliability) while maintaining asset integrity.

approach and Scope of Workbroad involvement of all stakeholders (oper-ations, management and iT employees) in the project KPMG Global AMcc supported operations and steering of the client’s busi-nesses by helping define and manage asset management project efforts for the imple-mentation of standard business processes. This approach focuses on the history and life cycle of the assets and leading practices in businesses and organizations.

outcomeThe project allowed the client to increase its process efficiency and the effectiveness of the equipment reliability processes. Additionally, the client sub-stantially reduced its overall maintenance costs and capital expenditure.

forward Thinking – KPMG looks ahead to innovate and challenge conventional thinking.

HOLISTIC

SYSTEMATIC

SYSTEMIC

RISK-BASEDOPTIMAL

SUSTAINABLE

INTEGRATED

KPMG Global Asset Management Competence

Center

KPMG Global asset Management

Competence Center

advice based on experience helping asset-intensive organizations.

KPMG aMCC is a patron of the Institute of asset

Management and a PaS 55 accredited auditor. KPMG

is an active delegate of the PC251, the committee

that drafted the new ISo standard on asset

Management (ISo 5500x).

10 | THe KPmG DIFFereNCe | November 2013

GLoBaL MIndSeT

Global Mergers & acquisitions

Predictor Watching the trends in mergers and acquisitions tells us a lot about the

health of the economy. That is why every six months KPMG providesinsights on what’s new in the world of M&a.

Global Mindset – KPMG strives to provide perspective and apply our global thinking to a local level.


The Mergers & Acquisitions Predictor analyzes the M&A appetite and capacity to pro-vide a general sense of the

international M&A trends for the coming months. This summer, the results showed that deal appetite among the world’s largest corporate companies is higher than it was 12 months ago. In the shorter term however, global uncer-tainty over macroeconomic factors con-tinues to hamper confidence.

In contrast, in the Belgian market, confidence amongst stock-quoted companies has increased over the past half year. M&A appetite went up across all segments. This is the second

consecutive half year improvement in appetite for deals by the 60 largest Belgian quoted companies. The strong-est appetite improvement over the past half year was shown by the small cap segment (23%). Belgian’s largest cor-porates exhibited an increased appetite for deals when compared to June 2012 as forward P/e ratios were up 9%.

The Toyo Ink Group – closing the deal Toyo Ink Group is a Japanese leading provider of printing inks, packaging materials, polymer and coatings with operations spanning the Americas, Asia and europe. They have roughly 7,000 employees worldwide. The KPMG Corporate Finance, Transactions Services and M&A Tax teams worked with Toyo Ink Group on a key acquisi-tion in their growth.By relying on their deep sectoral knowledge, global reach, M&A exper-tise and credentials the KPMG teams supported Toyo Ink Group in the valu-ation analysis, bidding strategy, due

diligence and transaction negotia-tions to successfully acquire Arets International, a Belgian manufacturer of UV-cure inks and varnishes. These products are well positioned in the pursuit of eco-friendly alternatives and will contribute significantly to Toyo Ink Group’s sustainable growth in the future.

With this initiative, the Toyo Ink Group plans to expand the aggregate annual scale of the UV cured product group from the present 120 million euros to 240 million euros within 3 years.

amlin europe – post-deal transformation successAmlin europe is a leading non-life and corporate insurer with operations in The Netherlands and Belgium on marine, property, liability, fleet insur-ance and Financial Products (Captives). The Management Consulting team of KPMG Advisory worked with Amlin europe to help set up the new finance department, stabilize its operations and assist with various aspects of the ongoing finance activities.In a time of challenging transformation, the Management Consulting team of KPMG Advisory came alongside, bring-ing their broad experience in finance, change management and experts from

a wide range of subject matters to get the job done. Thanks to their support, the disentanglement from the former parent company and reintegration of the finance activities were preformed successfully. Furthermore, the tem-porary Finance Department structure implemented during the project phase has been rolled over into a stable and permanent organization.

Thanks to this collaboration, Amlin europe is ready to take on the next challenges in their competitive indus-try and move towards their further expansion in continental europe.

Global Mergers & acquisitions

Predictor

The Management Consulting team of KPMG Advisory has been a solid partner to assist us with the challenges of our transformation process.” Joost Tyvaert – Finance Manager Belgium – Amlin Europe

We successfully completed this project because of your support, and I thank you all greatly. Although there was time zone difference between Japan and Belgium, KPMG and the lawyers cooperated quickly. It was a great team.”Satoru Takashima Corporate Officer – The Toyo Ink Group

Despite higher debt levels than the rest of Europe, Belgian companies have shown an increased appetite for M&A since the beginning of the year. We expect this M&A wave in Belgium to continue in the next half year.” Yann dekeyser – Partner KPMG Advisory

9% 14%Capacity

(net debt to EBITDA ratios)

SInCE JunE 2013

We put our transformational expertise to work for our clients from M&a transactions to post-deal support. here is what they thought of the results:

TheW

ManBehindthe Fiber

KPMG: What was the source of your inspiration?

Anke Domaske: It all started because my stepdad suffered from cancer, and he had a textile allergy. Therefore, we were looking for a chemical-free fabric. Textiles are all over the place, but we couldn’t find any. So I was looking for alternatives.I found these milk fibers that had been produced in the 1930s, so the milk fibers concept is not what is new. But when I read more about it I found out they used formaldehyde and that the whole process was very chemical intensive and took up to 60 hours. It was not eco-friendly at all and it was not a sustainable or natural fiber.Our idea is different. We found a way to use nat-ural ingredients and renewable resources and create a stable product. It is purely scientific. everything is molecules and we connect these molecules to harden the fiber. As the water evap-orates on the molecular level the result is stable. Now we don’t need these chemicals anymore.

The overall process is comparable to cooking. It’s like taking flour, some butter, then mixing it. By pushing that dough through a nozzle you get spaghetti. In this case though, the holes in the plate are microscopic.You get a result that is very close to silk because it’s a protein fiber. Finding a water insoluble prod-uct was hard! We were only two people at the beginning, and I had never studied inventing or creating textile fibers. So it really required a lot of reading and testing. And a little bit of luck.We had to have no fear – we just did it.

KPMG: What is unique about the Qmilch fiber

Anke Domaske: It is a biopolymer that consists of 100% natural ingredients. This is different from other products, which will be ‘bio-based’.It is extremely environmentally friendly:• it only takes 2 minutes to produce,• it is produced at low temperature

Anke Domaske took a moment out of her busy schedule managing Qmilch to answer a few questions about her innovative product.1

1 Domaske, Anke. (April 2013). Telephone interview.

InTervIeW MILK fIBer


• there is no waste produced at all and

• it uses a waste product from the dairy industry.

In addition it has outstanding features making it incomparable to any other products. When I started I wanted an antibacterial product..Usually for a textile to be anti-bacterial, there has to be silver or zinc oxide imbedded in the product.But this fiber has a unique com-bination of amino acids and so it is naturally antibacterial.

It is amazing! I was so happy when I got the results of the tests.It is the most basic fiber but it has these hidden properties that are incredible. There are so many great things nature can give to us that we don’t know.I think that is very sad. There are so many things that our grandmothers used to know that we just

don’t use anymore. I run across things all the time, and I think ‘Oh that is so cool, why is nobody doing this?’ So here is one opportu-nity to use a great natural product.

KPMG: how do you balance the scientific side of your work with the design side of your work?

Anke Domaske : I don’t even really know because I have done it my whole life. I grew up with it.My great grandmother designed clothing so I grew up with sewing. And at the same time, I was so interested in science. I participated in a lot of science competitions.When I was 10 my idol was Robert Koch, the German Louis Pasteur.

I found science so interesting. My first science project was to explore the cleanliness of tele-phone booths. So I was running from one phone booth to another looking for bacteria.I have done this my whole life. And I actually feel like Design and science have a lot in common. In

It is the most basic fiber but it has these hidden properties that are incredible. There are so many great things nature can give to us that we don’t know.”

Anke Domaske’s passion is what led her to this innovative solution.


science you have to be creative on the process. And sewing can be technical-you have to draw and have a pattern.As a young adult I travelled to the United States and worked on a dairy farm and then to Japan where I got the idea for a t-shirt fashion line. By then, I was 19 and I had to decide what are you going to do with your life?I needed to come up with Plan B and so that is when. I started to study micro-biology. I always thought I would have to decide. The day will come that you will have to decide but that day never came…

KPMG: Is there one side you prefer? Why?

Anke Domaske: No – But I would not consider myself as a fashion designer or a scientist. I like the mix. That’s me. I would really consider myself to be an entrepreneur. That is what I always liked. I sold cherry blossoms on the side of the road when I was three years old and earned my first money.It’s inside of me to have a company and to cre-ate something of my own. So that is how I see myself.

KPMG: how did you overcome the challenges along the way?

Anke Domaske: The real challenge is to keep going even if you have setbacks or if you see that something does not work.I am more the kind of person who sees what can work. You need to go step by step.And it takes a lot of hard work. Of course there are setbacks. But I learned that you have to go to sleep at night and everything is ok the next day. This way you can just keep going.There is always going to be a solution to the problem. You just have to look for it.That’s my motto.

KPMG: do you see yourself as part of a movement of european Innovators?

Anke Domaske: Yes, I think there is so much more to come in the field of new materials, and eco-friendly, sustainable processes and innovation.I am curious to see what else will come from other innovators. There are so many great ideas in europe. And I think they need all the support they can get. Sometimes the biggest challenge is getting these ideas to the market. I run across these great inventions, and I think, I would buy that, but I can’t.There have to be some changes so that these great inventions can get the attention they need to get big. Revolutionizing an already existing process is a critical driver for technological and economic progress.

KPMG: What is your vision for the future?

Anke Domaske: My first vision is to set up my production plant by the end of this year. That is my main focus right now.We already have the facilities, so when you go inside you can see how the plant is set up. You look up and you can see fibers coming out of the machine! That is currently my biggest dream.I want what every business owner envisions for the future – for my company to develop and grow and my product to make it to the market and make a difference.I would potentially like to have more production facilities and to set up all the networks around it. A network for the waste milk and even expand the research past milk towards other biopolymers like it. And to expand its application for other prod-ucts, like chemical-free toys for example. It’s a gift to have this company. It is so wonderful to see everyday how our product could be used. Talking to people and getting such overwhelming responses. Running into open doors- it can’t get any better than that. It’s a great blessing what we have got.

I want what every business owner envisions for the future - for my company to develop and grow and my product to make it to the market and make a difference.”

InTervIeW MILK fIBer


noveMber 2013 | The KPMG Difference | 15

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It’s surprising but true. Milk fibers are a sustainable solution and provide new opportunities for economic

growth. Shirts made of milk fiber will be a reality in the near future.

You need to innovate while improving performance?

Our specialists are here for you. They can advise you on improving processes and help you chose

the most suitable business model to maintain your competitive advantage.



Producing an environmentally friendly fiber

1| Take sour milk, a raw material that is otherwise wasted and unmarketable.

2| Process it naturally until it becomes the most basic pro-tein in the milk, a protein called casein.

3| Push it through a machine with microscopic holes to produce a smooth thread.

4| Use it just like regular thread.

Population and consumption are fast increasing. The earth’s resources are being depleted accordingly. KPMG Sustainability supports smart organizations in meeting the demands of such a reality.”Mike Boonen Sustainability Partner KPMG in Belgium

Milk fibers are created through an innovative process that requires less water and none of the chemicals required for other textiles. This is how we can derive

an eco-friendly fiber from milk.

The “Making Of” Milk fiber

What is the difference?

• It is hypoallergenic.• It feels like silk to the touch.• It requires no special care because

of its natural protein base.• It is biodegradable in the long run.• It provides a balance between

the 3Ps.

Profit (new opportunity)

People (worker friendly environment)

Planet (sustainable solutions)

TruSTed advISor CaMPaIGn

noveMber 2013 | The KPMG Difference | 17

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In Belgium, there are several efforts aiming to promote innova-tion. Policies, like the Flanders in Action Plan, the Brussels Regional

Innovation Plan of 2007-2013 and Creative Wallonia, have had some pos-itive impacts.As a result, innovation investments are on the rise. But we need to keep this focus if we want to see sustain-able economic growth and safeguard Belgium’s competitive position in europe and around the world. 1

These figures show where Belgian companies are investing the most in the five main innovation investment areas. The highest are in acquisitions of machinery and training and the low-est are in external acquisitions for R&D and other knowledge.

1 Bruno, nelly and Van Til, John. (2011). Mini Country Report/Belgium- Thematic Report on

Innovation. under Specific Contract for the Integration of InnO Policy TrendChart with

ERAWATCH, Brussels

Innovation investments are on the rise. But we need to keep this focus if we want to see sustainable economic growth and safeguard Belgium’s competitive position in europe and around the world.

20%Acquisition

of other external knowledge

31%External R&D

56%In house R&D

60%Training for innovation activities

61%Acquisition

of Machinery

Break down of

investments

Belgium’s strength is in its open, excellent and attractive research systems and its linkages between entrepreneurs and innovators. However, if Belgium wants to go from an innovation follower to an innovation leader, areas for improvement include financing and support for its intellectual assets.”

Source: comparing innovation Performance of eU Member States. (2013). european commission, brussels.

InnovaTIon

Belgian Companies Invest in Innovation


vaLue addInG

new fairness Tax The fairness tax was introduced through the law of 30 July 2013 (Belgian official gazette of 1 August 2013) and will apply as from assessment year 2014. The main objective of this new tax is to serve as a sort of minimum taxation for large com-panies that pay little or no corporate income tax in Belgium. Introduced as a separate corporate income tax, it increases the tax burden of multinational com-panies investing in Belgium, but only if they pay dividends to their (Belgian or foreign) shareholders. Below is an overview of the principle features of this fairness tax.

1. Fairness tax: a separate taxationThe fairness tax was introduced as a separate taxation within corporate income tax. It is inde-pendent of, and applied in addition to, other cor-porate income taxation(s). This separate taxation is, like the corporate income tax, not deductible.

2. Rate: 5.15%The rate amounts to 5.15% (5% with a 3 % crisis surcharge). The tax payer should make tax prepay-ments; otherwise there will be an increase due to a lack of or insufficient advance tax payments.

3. Taxable base: the fairness tax will only be due if the amount of declared dividends is higher than the final taxable result. The final taxable result is the amount that is subject

to tax, after application of all available tax deductions. The fairness tax is levied for the taxable period for which dividends are distributed. The concept of ‘dividends’ also includes the repayment of the company’s capital, issue premiums and partici-

pation certificates (if they qualify as dividends). however, the liquidation gains, repurchase gains and re-qual-ified interest are not included. The dividends, which are taxed at 10% in the context of the transition regime for liquidation gains, must also not be taken into account when applying the fairness tax.

There are three steps that must be taken in order to calculate the taxable base of the “fairness tax”: 1. determine the positive difference between the gross amount of distributed dividends and the final taxable result, which is subject to corporate income tax. 2. The taxed reserves constituted no later than assessment year 2014 are excluded from the tax-able base. The result of the first step is reduced by the distributed dividends originating from pre-viously taxed reserves. The Last in-first out (Lifo)-method is used so that previously taxed reserves are first taken from the last reserves. Only reserves constituted until assessment year 2014 are considered to be good reserves and will be deductible from the taxable base.

The new tax fairness may require action from your finance department. here our KPMG tax experts provide an overview and easy guide to understanding and implementing the principle features of this tax.

Technical Perspectives

from Tax

value adding – KPMG provides practical ideas to real business challenges.


3. Make the link with the reduction of the tax-able result through “harmful” tax attributes (i.e. previous tax losses and the NID of the year). The result achieved after the first and second step will then be multiplied by a percentage reflecting the proportion between, on the one hand the ‘harm-ful’ tax attributes and, on the other hand, the taxable result of the taxable period (result after the first operation: sum of reserves, disallowed expenses and dividends, excluding exempt write-offs, provisions and capital gains). This is how the final taxable base for the fairness tax is calcu-lated. It cannot be limited or reduced in any way.

The fairness tax will also be due in cases where the parent-subsidiary directive applies (participa-tion of 10% or more). The government has submit-ted the fairness tax to the european Commission.

4. Tax payers: the fairness tax does not apply to companies that qualify as SMEs.The separate taxation only applies to large com-panies as defined by article 15 of the Companies Code (to be determined on a consolidated basis). The fairness tax also applies to non-resident com-panies (i.e. companies with a Belgian permanent establishment).

Be sure to go to our website to sign-up... up for regular tax updates and events.

“The session included strong explanations in accessible terms and good practical examples.”

A recent participant at a KPMG tax event.

other Tax newsCapital gains on shares still exempt from corporate tax in some cases

Capital gains on shares that were formerly fully exempt from corporate tax will, from the 2014 assessment year onwards, be taxed at a rate of 0.412%. This applies to shares in companies under a normal tax regime which have been held for at least 1 year in full ownership at the time of realization (minimum holding period introduced as from 2012). This tax is due regardless, since the capital gains may not be compensated for by a tax deduction (e.g. tax losses, notional interest deduction, etc.). Small and medium-sized enterprises as defined in the Belgian Companies Code are, however, exempt from this capital gains tax.

TéTière

Beyond the Suitsat KPMG our experts are the serious diligent types. That is how they get you the leading insights you need. But we are more than that. here is how.


PaSSIonaTe

TéTière

Joining the Fight Against CancerIn this day and age, few are the people whose lives have remained untouched by cancer. That’s why we, at KPMG, think it is important to play our part in the fight against this disease to support scientific research. This year again, we joined the “Kom op tegen Kanker” 1,000 km cycling tour.

A winning team of sports-minded KPMG employ-ees gave their all during the Ascension weekend and cycled 1000 kilometers raising a total of 15,040 for this great cause.

We are already revving up for next year’s challenge. Stay tuned for more kilometers and euros for the cause.

Make A Difference Dayeach year, Make a Difference Day (MADD) gives KPMG employ-ees a chance to put down their calculators and pick up paint-brushes, rakes, hammers and wheelbarrows.

The event brought together 80 volunteers in 9 different community projects. Thanks to its resounding success for the KPMG teams and the community organizations involved, a second phase is planned later in the year which will keep the relationships and collaboration going strong.

Electric Cars for a Brighter FutureThe KPMG network in Belgium has taken a further step to reduce its mobility carbon footprint by way of a pioneering project called Care. The pro-ject revolves around the expansion of the KPMG car fleet by two new 100% electric pool cars,

which can be used by all employ-ees when travelling short distances to clients and other work-related appointments (e.g. seminars).

every six months the cars will be replaced by two other cars to allow us to become fully acquainted with the current choice in green mobility, new developments and advantages. ■


SOME Of ThE ADVANTAGES ARE:

• 100% electric cars do not run on polluting fossil fuels

• Their co2 emis-sion is historically low and almost reduced to zero

• Thanks to lithi-um-ion technology, they do not con-sume any energy when they are not being used and even recuperate energy when using the breaks.

Passionate – at KPMG we want our work to have a positive impact on our communities and change things for the better.


BooKSheLf

The Global automotive retail market The most recent developments in the automotive retailing sector are focused on shifts toward emerging markets. But what can these changes do to update the business model to match the shifts in the market.The publication presents an in-depth analysis of past developments in the global car sales market, and the out-look for all major auto retail markets up to 2020: • The shift in demand towards

growth regions will reach unprec-edented rates by 2020, with China the undisputed leader.

• Many former emerging markets may well have evolved into ‘estab-lishing’ markets (the stage between emerging and fully established), but due to prevailing disparities they will still be some way from being established by 2020.

• Although the established markets of North America and Western europe will not be able to compete with the growth rates of estab-lishing markets, they will still be the most important global sales regions after China.

The full report can be accessed by using the KPMG app.

Bookshelf Through our cutting edge Thought Leadership, our experts provide

an inside look at the latest trends and what they mean for you and your business. here is a just a sample of some of our recent

publications. More are available via our KPMG app.


Sustainable SoySoy is one of the world’s most important and profitable agri-cultural commodities. But it is also controversial because its production is associated with significant environmental and social problems including deforestation and poor working conditions. The production of soy is soaring as global population growth and increasing wealth in the developing world drive demand. Demand from the animal feed sector is also a key driver, as is the growth of the biofuel industry, driven by some coun-tries’ commitments to biofuel use.

Why responsible soy matters • Increasing the production of certified soy will help to

address the industry’s environmental and social challenges. • Sourcing certified soy will help to reduce reputational and

commercial risks faced by soy end-users such as food com-panies and manufacturers of animal feed and biofuels.

KPMG member firms are active in assisting clients – includ-ing corporates, policy-makers and NGOs – with the devel-opment of sustainable supply chains, and have particular expertise in soft commodities. Our member firms help cli-ents to understand the economics of certification systems and to address the broader challenges of developing sus-tainable supply chains in a resource-constrained world.


People are the real numbers

human Resources’ current approach to analytics remains anchored in the pres-ent and in the past. however, when applied properly, hR analytics can show connections, correlations and even cau-sality between hR metrics and other business measures – all of which can be used to inform hR strategy and actions.

As a result, hR leaders will need to hire a new generation of hR specialists to make the most of the new data they are able to collect. historically, statistics and data analysis has not been a core requirement of hR roles, but to get it right, hR teams will need people who have deep quantitative analysis skills.In addition, hR experts need to create a clear ‘line of sight’ between hR activ-ity and their organization’s bottom-line profitability; hR analytics can provide a tangible link between people strategy and organization’s performance. To help hR experts, the KPMG Strategic Workforce Framework provides a plat-form that identifies the key people issues and develops an overall people agenda that supports an organization’s strategy. This framework includes five main cat-egories for the hR team to review and consider: Connections, Compliance, Cost, Capacity and Capability.


Increasing the production of

certified soy will help to address

the industry’s environmental

and social challenges.

hr analytics can provide a tangible link between people strategy and organization’s performance.


KPMG experts are dedicated to sharing their expertise with you. here we highlight some of the recent and upcoming key events where you can and have had a chance to rub elbows with the authors and thinkers behind it all.

Meet and Greet

The second european Congress on asset ManagementValue creation through physical asset management is pos-sible. On October 17, in collaboration with the Institution of engineering and Technology, KPMG hosted an event, gather-ing leading experts on Physical Asset Management and pro-viding opportunities to gain insights on how to directly apply these practices in the business environment.

other InsightsIn all sectors, changes in the regulatory framework are a part of the new reality. KPMG experts host events all year long to provide you with the latest and how it will impact your business.This fall the topics focus on IFRS and various tax updates.

Pictured here (from left to right): Koen De Loose, Advisory Partner, Ann Duchene, Advisory Senior Manager, frans Simonetti, Audit Senior Manager, Peter Geeraerts, Advisory Senior Manager, Colin Martin, Partner at the KPMG network in the uK and Kenneth Vermeire, Audit Partner.

When are the other IfrS trainings scheduled?

On September 19, a team of KPMG’s top financial services experts shared their insights on IFRS changes. Over 150 par-ticipants gained insights on how to prepare for the regulatory changes facing their businesses.

KPMG exPerTS


Big data provides a new playground for savvy marketers in the retail sector.

The Last Word

Two terms nicely sum up just how much data is floating around the world these days. • ‘zettabyte’ - a one followed by 21 zeroes which some analysts think is the amount of informa-

tion, in bytes, now on the internet. • ‘data puking’- a phrase that, while not elegant, sug-gests that a lot of this information is undigested and unwelcome. You know more about your customers than ever before. But how much of your data is actually helping your bot-tom line?

Retailers in particular, will be only too aware of both phenomena. The develop-ment of enterprise Resource Planning (eRP) systems opened up the possibil-ity of distributing business information across stores and even continents. The advent of the internet led to an expo-nential increase in the amount of cus-tomer information and insight available.

Impact of social media

But social media may be the straw that broke the camel’s back. Twitter’s global penetration among internet users is around 10%. But already 177 million tweets are sent every day.

With social media, a relatively small number of people account for a disproportionate amount of content, so it’s easy to overreact to bad mood music. With new social media channels making the potential amount of brand-rel-evant information almost limitless, it is tempting to simply give up in the face of the flood and stick to old fashioned sales metrics and time-honored intuition. Yet, certain com-panies are learning how to manipulate a new generation of data to their advantage.

At its most profound, customer insight can help shape product development, pricing and branding. But it requires proper skill. Retailers can spot trends, take a certain point of view and give them some direction to engage with con-sumers who communicate via social media. By equipping themselves to prosper in spite of the noise, retailers can turn threats into opportunities.

‘Measuring’ consumer behaviorA popular concept in consumer markets circles is “shopper marketing.” This is a strategy that interprets and interrupts (or positively influences) the path to purchase in store. even though shoppers are generally trying to avoid impulse pur-chases and manage budgets, snap decisions taken in the aisle are still huge drivers for high-margin items.

That’s why retailers have to understand consumer behavior in the store. Analytics companies use data taken from existing in-store security cameras to track custom-ers. The data can help them to discover how they move around a store, how much time they spend in certain places and the rate of time spent to purchase.

At the cutting edge of in-store data, things are getting even more granular. employees can be asked to wear tiny wi-fi boxes to track their movement and align it to customer patterns to create new shift rosters that ensure no area is ever under-staffed in a busy period. Weather sensors show the effect of heavy rain or baking sun on customer behavior.

Keeping up with the data

But the hardest part of the data puzzle can be aligning what you learn from your customers with what you already know. Traditional eRP systems just aren’t designed to deal with the amount of data now being pro-duced, or present it in ways that are readable and useful to either marketers or the finance department. Providers such as Oracle and SAP are coming up with big solutions for big data.

It sounds like a playground for savvy marketers. And in some ways it is. But the cloud on the horizon is the customers themselves. They also have information, especially about price, which could lead too many retailers into a race for the bottom, as they slash prices to react to the threat of real-time data. That gets even harder when retailers haven’t joined up pricing and stock availability across their own channels. A con-sumer backlash against sharing data has yet to materialize on a significant scale. Retailers can collect all the zettabytes they want; inevitably, they must generate their consumers’ trust in order to succeed.

Groupe Casino, the French supermarket giant has developed a smartphone app which lets customers compile a shopping list before they visit the store, and pushes offers based on their preferences. Casino’s long-stand-ing pricing technology gets rid of discrepancies between stores (or between shelf and till) in an instant, and allows the chain to react quickly, and roll out changes in an instant, when its rivals shift their price points. Tesco is follow-ing in its footsteps with an app that gives customers the fastest route around a chosen store based on their shopping list.

reTaIL



It’s surprising but true. Milk fibers are a sustainable solution and provide new opportunities for

economic growth. Shirts made of milk fiber will be a reality in the near future.

how do you address the risks linked to innovation?

In innovative and ambitious projects, our experts can help you manage your operational, financial and IT risks both in the short-run and

in the long-run.


KPMG exPerTISe

KPMG expertise

Improving Performance> Transformational Program

Management & Post-Merger Integration

> Financial Management & Accountancy Advisory Services

> Physical Asset Management> Business Intelligence & Analytics> Strategy & Operations> Talent & human Capital

Management> CIO Advisory> Intelligent decision support> Tax efficiency & Optimization

Advice> Internal Audit Assurance

addressing risk> Internal Audit, Risk & Compliance> Forensic> Financial Risk Management> Actuarial Services> Sustainability> IT Risk Management &

Investigations> Tax Compliance> Tax Technology> Revenue Audit Assurance

Grow your Business> Transformational Growth Strategy> Due Diligence> M&A Support> Valuations> Debt Financing> Restructuring> Technology enabled Business

Transformation> Tax Structuring> Sustainable Audit Assurance

W e have the expertise to shape a client’s response to opportunities and challenges

right across the deal cycle.Many large organizations have turned to us for risk consulting, helping them to navigate through their most com-plex issues, shaping the thinking from board to operational management,

transforming risk to their advantage.We help you to make better decisions, reduce costs, build more effective organizations and develop appropriate technology strategies.

At KPMG, we provide value-add-ing services that drive and support your boardroom decision making.

Our broad advisory skills, combined with our knowledge in audit, tax and regulatory expertise allow us to link your challenges to industry issues and technologies that can help you face the future.

We are here to help you achieve lasting transformation.


It’s surprising but true. Milk fibers are a sustainable solution and provide new opportunities for

economic growth. Shirts made of milk fiber will be a reality in the near future.

how do you address the risks linked to innovation?

In innovative and ambitious projects, our experts can help you manage your operational, financial and IT risks both in the short-run and

in the long-run.


Milk Fibers in NumbersErik ClinckPartnerKPMG Bedrijfsrevisoren/Réviseurs d’EntreprisesT: +32 (0)3 821 18 55E: [email protected]

The Cumulative Impact of Regulation Koen De LoosePartnerKPMG AdvisoryT: +32 (0)2 708 43 17E: [email protected]

Physical Asset ManagementDaniël PaironPartnerKPMG AdvisoryT: +32 (0)3 821 19 41E: [email protected]

M&A PredictorYann DekeyserPartnerKPMG AdvisoryT: +32 (0)3 821 18 64E: [email protected]

Fairness TaxDirk Van StappenPartnerKPMG Tax and Legal AdvisersT: +32 (0)3 821 19 18E: [email protected]

Capital GainsDirk Van StappenPartnerKPMG Tax and Legal AdvisersT: +32 (0)3 821 19 18E: [email protected]

Meet and GreetNatalie RomboutsBrand and Events ManagerKPMG Support ServicesT: +32 (0)2 708 49 56E:[email protected]

The Data Behind the saleLudo RuysenPartnerKPMG Bedrijfsrevisoren/Réviseurs d’EntreprisesT: +32 (0)3 821 18 37E: [email protected]

Contact

The information contained in this magazine is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This magazine is also available in Dutch and in French.

© 2013 KPMG Support Services, een Belgisch economisch Samenwerkingsverband (“eSV/GIe”) en lid van het KPMG netwerk van © 2013 KPMG Support Services, a Belgian economic Interest Grouping (“eSV/GIe”) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Belgium.

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the kpmg difference - november 2013 (in english)

Documents

kpmg app

kpmg expertisecontentsnovember

milk fibers

key kpmg attributes

milk waste

making of milk fiber

changing world

sustainable transformation