Cross-Border Advisory

# Legal Roadmap for Indian Companies Expanding to Europe

January 28, 2026
12 min read

Indian companies are increasingly establishing operations in Europe — driven by market access, technology acquisition, supply chain diversification, and strategic positioning. According to the Confederation of Indian Industry (CII), over 800 Indian companies now operate across the European Union, with collective investments exceeding €50 billion. Yet the legal complexities of European market entry — from entity formation and regulatory compliance to taxation and employment law — remain significant barriers for many Indian businesses.

At ESB Global Law Advisory, we advise Indian companies on cross-border legal strategy across eight European jurisdictions. This guide provides a practical legal roadmap for Indian businesses planning their European expansion.

## Step 1: Choose the Right Jurisdiction

Your choice of European jurisdiction should align with your business objectives, target customers, tax strategy, and regulatory environment. Here is a comparative overview:

Country | Entity Type | Min. Capital | Corp. Tax | Best For
--- | --- | --- | --- | ---
UK | Ltd | £1 | 25% | Services, fintech, common law familiarity
Germany | GmbH | €25,000 | ~30% | Manufacturing, engineering, automotive
Netherlands | BV | €0.01 | 25.8% | Holding structures, logistics, EU HQ
Ireland | Ltd | €1 | 12.5% | Technology, pharma, EMEA headquarters
France | SAS | €1 | 25% | Luxury, aerospace, consumer goods
Switzerland | GmbH/AG | CHF 20,000 | ~14% | Banking, commodities, IP holding

## Step 2: RBI and FEMA Compliance for Overseas Investment

Before investing abroad, Indian companies must comply with the Reserve Bank of India's Overseas Direct Investment (ODI) framework under the Foreign Exchange Management Act (FEMA). Key requirements include:

- Automatic Route: Investment up to 400% of the Indian company's net worth can be made without prior RBI approval
- Banking channel: All remittances must be routed through an authorised dealer bank
- Reporting: Form ODI must be filed with the RBI within 30 days of the investment
- Annual Performance Report (APR): Must be filed annually for each overseas subsidiary
- Valuation: Investment must be at fair market value determined by a registered valuer

## Step 3: Entity Formation and Corporate Governance

Each European jurisdiction has its own company formation process, but common steps include:

1. Drafting Articles of Association compliant with local company law
2. Appointing local directors where required (mandatory in Germany and Switzerland)
3. Opening a local bank account for share capital deposit
4. Registration with the commercial register (Companies House in UK, Handelsregister in Germany, KVK in Netherlands)
5. Obtaining a VAT number for intra-EU trade
6. Registering for local employment and social security obligations

## Step 4: GDPR and Data Protection Compliance

Any Indian company processing personal data of EU residents — whether through a European subsidiary, e-commerce website, or SaaS platform — must comply with the General Data Protection Regulation (GDPR). Non-compliance can result in fines up to €20 million or 4% of global annual turnover.

Key GDPR obligations:

- Lawful basis for processing personal data (consent, contract, legitimate interest)
- Data breach notification to authorities within 72 hours
- Appointing a Data Protection Officer (DPO) if processing personal data at scale
- Cross-border data transfer mechanisms for India-EU data flows (Standard Contractual Clauses)
- Privacy-by-design in all products and services

## Step 5: Transfer Pricing and Tax Strategy

Cross-border transactions between an Indian parent company and its European subsidiary are subject to transfer pricing regulations in both India and the European jurisdiction. Both India and most European countries follow the OECD Transfer Pricing Guidelines.

Indian companies should structure their intercompany arrangements with proper documentation from inception, not as an afterthought. This includes intercompany service agreements, licensing arrangements, management fees, and cost-sharing arrangements — all at arm's length prices supported by benchmarking studies.

India's Double Taxation Avoidance Agreements (DTAAs) with most European countries provide relief from double taxation on dividends, interest, royalties, and capital gains. The treaty rates vary by jurisdiction, making the choice of European entity location a significant tax planning factor.

## Step 6: Employment Law and Hiring

European employment law is significantly more employee-protective than Indian labour law. Key differences Indian companies must navigate include:

- Termination protection: Most EU countries require just cause for dismissal, with statutory notice periods and severance payments
- Working time: The EU Working Time Directive limits working hours to 48 per week (averaged)
- Paid leave: Minimum 20 paid vacation days across the EU (often 25-30 in practice)
- Works councils: In Germany, France, and Netherlands, employee representation structures are mandatory above certain thresholds
- Social security: Employer social contributions range from 13% (UK) to 45% (France) of gross salary

## Frequently Asked Questions

The best European country depends on your business objectives. The Netherlands is popular for holding company structures due to its extensive tax treaty network and flexible corporate law. The United Kingdom offers a common law system familiar to Indian businesses, strong financial services, and no minimum capital requirement. Germany provides access to the EU's largest economy and strong manufacturing ecosystem. Ireland is favoured by technology companies for its 12.5% corporate tax rate and English-speaking workforce. ESB Global Law Advisory recommends a jurisdiction analysis based on your specific industry, target market, tax considerations, and regulatory requirements.

Under the Reserve Bank of India's (RBI) Liberalised Remittance Scheme (LRS) and Overseas Direct Investment (ODI) regulations under FEMA, Indian companies can make overseas investments through the automatic route or approval route. Under the automatic route (most common), Indian companies can invest up to 400% of their net worth in a foreign entity without prior RBI approval, provided the investment is funded through banking channels and reported to the RBI within 30 days. Investments exceeding this limit or in certain restricted sectors require prior RBI approval.

The General Data Protection Regulation (GDPR) is the EU's comprehensive data protection law that applies to any organisation processing personal data of individuals in the EU — regardless of where the organisation is based. Indian companies operating in Europe must comply with GDPR requirements including: obtaining lawful consent for data processing, appointing a Data Protection Officer (DPO) in certain cases, implementing data breach notification procedures (72-hour requirement), ensuring cross-border data transfer compliance when sending EU personal data to India, and maintaining records of processing activities. Non-compliance can result in fines up to €20 million or 4% of global annual turnover.

### Planning Your European Expansion?

ESB Global Law Advisory provides end-to-end legal support for Indian companies entering European markets — from jurisdiction selection and entity formation to regulatory compliance and ongoing corporate governance.

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