KPMG is weighing the end of its 41-year partnership with Egyptian affiliate Hazem Hassan as part of a global restructuring

KPMG is considering restructuring operations in Egypt, in a move that could end its 41-year partnership with local affiliate Hazem Hassan, three sources familiar with the matter tell EnterpriseAM. The potential split is part of a broader global restructuring at the Dutch-headquartered accounting and advisory network, the sources say.

Egypt’s accounting and audit sector is going through significant turbulence that is affecting several major international firms, former head of the Egyptian Tax Authority and current UN international tax advisor Mostafa Kader tells EnterpriseAM. The uncertainty is largely due to Egypt’s continued delay in implementing the OECD’s global minimum tax framework under Pillar Two, which sets a 15% minimum tax rate on multinational corporations, he says. The lack of a clear timeline for adopting the framework has increased uncertainty surrounding international tax treatment and multinational operations in Egypt, he adds.

SOUND SMART- The OECD introduced the Pillar Two model rules in December 2021 as part of a broader initiative to address tax challenges arising from the digitalization of the global economy. Over 135 countries, representing around 90% of global GDP, have endorsed the framework, which establishes a 15% global minimum tax for multinational companies with annual consolidated revenues exceeding EUR 750 mn.

There’s another reason: One sticking point which Hazem Hassan is taking issue with relates to KPMG’s branding structure, which is reportedly shifting to a franchising model with multiple offices operating under the same trademark in certain markets, two sources close to discussions within Hazem Hassan tell us.

KPMG’s partnership with Hazem Hassan remains intact for now. Reports of a finalized exit by September are unfounded, as any separation would require a lengthy transition period to safeguard client relationships and continuity of audited financial statements and balance sheets, one of the Hazem Hassan sources tells us. Negotiations between the two firms are still ongoing in an attempt to preserve the decades-long partnership, the source adds.

Hazem Hassan is already running contingency scenarios, both Hazem Hassan sources tell us. The firm is weighing several options to maintain client stability, including potential alliances with another Big Four firm or a new international franchise agreement, sources say. The priority is retaining multinational clients, many of which require an internationally affiliated audit firm for quarterly reporting and compliance purposes, but the sources say the separation could also create space to bring on new local clients.

The situation isn't confined to Hazem Hassan. It extends to the other three Big Four firms — Deloitte, PwC, and Ernst & Young, Kader says. The international tax framework now requires careful policy consideration to preserve stability within Egypt’s accounting and advisory sector, he adds.

A complete redrawing of the map: “The coming period could see Egypt’s international tax and consulting sector entirely reshaped,” a source at one of the big four accounting firms tells us. “The market should expect to see clients and talent shifting between firms to meet the requirements of the next phase, alongside potential acquisitions and the creation of new entities that align with international tax controls under OECD rules,” the source adds.