The Flanders region of Belgium is wooing Indian corporates with its favourable tax regime with an aim to set up their European treasury operations there. While Indian corporates have traditionally chosen to locate their European holding companies in the Netherlands, the Flanders region is showcasing its tax haven status to attract mainly treasury operations and holding companies.

The region is now banking on provisions in the Direct Tax Code, or DTC, which comes into force from April, 2012. Provisions in the DTC make repatriated profits taxable for Indian corporates and it is this aspect that officials from the Flanders region highlighted during a recent visit here.

There is a lot of money here, in India, with an appetite for acquisitions in Europe, similar to the situation of 2008. We expect that in 2011 and 2012, the flow of Indian investment in Belgium will grow. The new Indian direct tax code, or DTC... has placed an obstacle on Indian companies repatriating profits from their overseas arms.

Under the DTC, these companies will be liable to pay tax here on repatriated profits, making it unlikely that Indian companies will repatriate money to India. That money will stay in Europe for reinvestment. There are few Indian treasury companies now, but we are positioning Belgium as the preferred destination for these operations, said Laurens Narriana, partner, PricewaterhouseCoopers Tax Consultants.