Creativity & innovation: an abnormality in
the financial sector?
Presentation for the European Parliament
Brussels – March 4th, 2009
Department for Economic and Fiscal Innovations (DEFI)
DEFI : R&D department in the bank having for Mission Statement the
creation and the commercialisation of new products and
solutions answering the clients needs
An example of Corporate Entrepreneurship in a bank
Source of innovation, transformation and growth by:
(1) being a leader in the design, creation and commercialisation of
innovative financial & tax engineered products & services for the fullservice bank in the Benelux.
(2) accelerating profit growth with the DEFI “Cyclone”:
Innovation -> Wholesale Banking Clients -> Private Banking ->
Wholesale Banking Clients -> Innovation.
“Innovative Products Incubator”
DEFI’s Cyclone
Innovative
Products
New business leads
Wholesale
Clients
Innovative products
Incubator
Wholesale
Clients
Better knowledge of company’s
executives:
Improved overall
relationship (cross-selling)
• Efficient networking within the company
PB
Retail
• Private Banking Leads
The TAX SHELTER case
The bank objectives were the following:
•
Differentiation from the other competitors
•
Create a cultural visibility for the bank
•
Cross-selling and new profit opportunities
Difficulties to face:
•
The bank bureaucratic model:
• Heavy procedures
• Lack of commitment in the organisation
• Inadequacies with the core business strategy
What is the Tax Shelter?
It is:
A Belgian tax incentive intended to stimulate investments in the audiovisual and
cinematographic industries.
For?
All domestic companies and Belgian establishments of foreign companies.
Tax benefit:
The tax shelter entitle companies to an immediate exemption of the total profit before
tax up to 150% of the amount invested provided that all the legal obligations are met.
This exemption is limited to:
• 50% of total profit before tax during the taxable period
• And an absolute exemption of EUR 750,000 (= maximum investment of EUR
500,000).
Investment:
• 40% of the investment amount is allocated in the form of a loan, and
• 60% of the investment amount concerns the acquisition of rights to some of the
proceeds coming from the production/exploitation of the audiovisual work
(equity).
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What is the Tax Shelter?
Tax benefit:
The tax shelter entitle companies to an immediate exemption of the total profit before
tax up to 150% of the amount invested provided that all the legal obligations are met.
This exemption is limited to:
•
50% of total profit before tax during the taxable period
•
And an absolute exemption of EUR 750,000 (= maximum investment of
EUR 500,000).
Investment:
40%
of the investment amount is allocated in the form of a loan, and
60%
of the investment amount concerns the acquisition of rights to some of
the proceeds coming from the production/exploitation of the
audiovisual work (equity).
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Tax Shelter Invest: features
How much?
Minimum investment EUR 50,000 and maximum EUR 500,000 (per EUR 10,000)
How?
By signing the subscription form attached to the ” Tax Shelter Invest” tripartite agreement
The investment is in two parts:
60% direct investment in “EQUITY”
 Entitlement to part of the future income from the film:
=> for 5 years following the end date of the film
 « + » a put option issued by the main producer:
=> makes it possible to resell the rights at a predetermined price;
Investment
(60 – 40)
=> that varies depending on the selected term of the investment (return 4.52%):
- 10.371% for an investment for 6 months
- 11.727% for an investment for 12 months
- 13.083% for an investment for 18 months
=> may be exercised for a period of 12 months starting from repayment of the loan
40% in the form of a loan
 The investor can choose between terms of 6, 12 and 18 months
 Gross interest: 6.847% (net interest: 4.52%)
 Secured by a bank guarantee issued by a BELGIAN Bank.
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Tax Shelter Invest: Example
Year
Tax Shelter
Tax
Total
- EUR 500,000
+ EUR 254,925
- EUR 245,075
(investment)
(Tax benefit: EUR 500,000 x 150% x 33.99%)
N+0
+ EUR 267,674
N+1
+ EUR 267,674
(Loan EUR 200,000, net interest EUR 9,039 and put option
EUR 58,635)
=> Total flows = 4.52% NET / year
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+ EUR 22,599
Structure of the product
INVESTOR
TAX SHELTER
INVEST
MAIN
PRODUCER
TAX SHELTER
PRODUCTIONS
What is the role of each of these parties?
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Tax Shelter Invest: safe investment
Loan + interest:
• Are covered by a bank guarantee given by the bank to the investor.
Equity/Put:
• Right to a portion of the future proceeds during the next 5 years
• The guarantee that these rights can be resold at a predetermined price to the Main
Producer during the 12 months following repayment of the loan
Tax benefit:
• Observance of legislation concerning the expenses in Belgium (check by TS
productions based on internal procedures)
• “Recognised Belgian audiovisual work” attest (prior check by TS productions)
• “End of film” attest guaranteed by the producer
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Advantages of the investment
Financial and tax security:
• The bank guarantee
• Tax ruling given by the tax authorities
• Secured banking product
Returns:
• Net return higher than current market interest rates
• Product that can deliver a substantial saving in the case of insufficient tax
prepayments
• Flexibility regarding the maturity (6,12 or 18 months).
Originality:
• Cultural product to promote investments in the Belgian audiovisual
industry
• Leading bank thanks to co-operation with Mr. Quinet and Mr. Bouckaert
(both chairmen of the professional association of film producers)
Simple:
• One contract
• Delegation of management and supervision to experts
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