FAQ for Indian Businesses Looking to Expand to the European Union and Germany
With Trump tariffs looming over global trade and exports to the United States, the European Union with its 450 million consumers and strong economy represents an attractive opportunity for Indian businesses looking to expand internationally.
This FAQ guide is designed to help Indian businesses understand key aspects of doing business in the EU and Germany, from partnering with local distributors to navigating e-commerce regulations and establishing a local entity. With practical answers to common questions, this resource offers a concise overview of legal, tax, and regulatory considerations to support your successful market entry.
We address the following questions:
How can Indian companies partner with local distributors in the EU and Germany?
What are the options for setting up an EU-based entity for Indian businesses, and what are the legal and tax implications when doing so in Germany?
What should Indian businesses know about e-commerce and digital trade when selling to EU customers, including in Germany?
What regulatory hurdles might Indian exporters face in the EU, and how can they overcome them?
These FAQs have been prepared in collaboration between NuernbergerLegal and End to End Advisors LLP with offices in New Delhi and Mumbai. Please note the important considerations marked with * at the end of this text.
1. How Can Indian Companies Partner With Local Distributors in the EU and Germany?
Partnering with an EU-based local distributor or agent is a common strategy to leverage an established European partner’s market knowledge and network. In such arrangements, the European distributor buys the Indian company’s products and resells them in the EU or acts as an agent and sells the products in return for a commission on the sales price.
In this scenario, contractual clarity is crucial: distribution agreements in the EU are largely governed by general contract law (there’s no single EU-wide distribution law), so parties should draft a detailed contract covering all questions relevant to their cooperation. They need to ensure that their contract complies with EU competition law – for example, EU rules (namely the Vertical Block Exemption Regulation) prohibit certain anti-competitive clauses in distribution agreements: Parties generally cannot fix the distributor’s resale prices or prevent them from selling outside an assigned territory in the EU, as that could violate Article 101 of the Treaty on the Functioning of the EU (anti-cartel rules).
Local partner selection is another critical aspect. Indian companies wishing to enter the EU market through a partnership with a local distributor or agent should conduct thorough due diligence on their potential partner’s reputation, know-how, infrastructure, financial health, and other relevant aspects. It is wise to choose partners experienced in your industry and with your product class and familiar with regulatory compliance (for example, a distributor for electronics should understand CE marking obligations).
Keep in mind that under EU product rules, the importer/distributor shares responsibility for product compliance – they must ensure products they introduce into the EU market conform to regulations and bear the required marks. As such, a reliable distributor will help you navigate registration, labeling, or certification requirements.
Some EU countries (including Germany) afford legal protections to certain long-term distributors similar to those for commercial agents, potentially including compensation on termination in specific cases, so you should ensure that your partnership agreement addresses termination rights and obtain local legal advice to avoid surprises due unfamiliar rules benefitting your EU partner in the case of a termination of the agreement.
Partnering with a distributor can accelerate market entry, but it requires a well-negotiated agreement and mutual commitment to compliance and performance.
2. What Are the Options for Setting Up an EU-based Entity for Indian Businesses, and What Are the Legal and Tax Implications of Doing so in Germany?
Establishing an EU presence can give Indian companies more control over distribution and easier access to customers. Common routes include opening a branch office or incorporating a local company.
In Germany, popular legal forms are the GmbH (Gesellschaft mit beschränkter Haftung, a private limited company) and its smaller cousin the UG (Entrepreneurial Company), as well as the AG (public stock company) for larger enterprises.
A GmbH is often the preferred vehicle – it benefits from an established reputation as the “go to” entity for private enterprises, provides strong liability protection, and, due to its minimum share capital of €25,000, generates confidence in the marketplace. Formation takes generally between 2 and 6 weeks and involves a notary public notarizing the Articles of Association and registering the entity with the local Commercial Register.
Germany imposes no general restriction on foreign ownership. Indian nationals or companies can be 100% owners of a German entity, and directors need not be German residents (although practically, having a local managing director facilitates many processes).
As an alternative to a subsidiary, Indian firms can consider opening a branch. A branch is not a separate legal entity but an extension of the foreign parent. The branch must register with public authorities in the country in which it is established and often, is subject to administrative requirements that come close to those for a subsidiary. One of the biggest disadvantages of a branch is that it is not a separate legal entity and therefore, the Indian company remains fully liable for the Branch (contrary to the situation of a subsidiary, which is separate from its parent and acts as a liability buffer).
The least intense form of a local presence in the EU is opening a purely representative office, which is an informal presence limited to liaison or market research and cannot conduct direct business to avoid generating taxable revenue.
Whichever structure you choose, pay attention to tax and compliance.
A German subsidiary, for example, will be subject to German corporate taxes on its profits. Germany’s corporate tax rate is 15% plus a 5.5% solidarity surcharge, totaling approximately 15.8%. In addition, German municipalities levy an additional trade tax which varies from municipality to municipality and generally ranges from 7% to 17%. This leads to an effective corporate tax rate of approximately 23% to 33%.
Germany has a tax treaty with India to avoid double taxation on cross-border income. A branch is generally taxed on German-sourced income similarly to a subsidiary.
The EU branch or subsidiary that is making taxable sales will also need to register for value added tax (VAT). It must then charge VAT on local sales and can recover VAT it pays to its vendors.
Further compliance requirements include maintaining German GAAP accounts, filing annual financial statements, and adhering to employment and social security laws if local staff is hired. In addition, German law mandates that every business (including foreign branches) obtain a trade registration (Gewerbeanmeldung) for the locale of operation, as well as register with the local chamber of commerce.
Despite these compliance requirements, setting up an EU entity is a suitable expansion strategy if you plan substantial operations in the EU.
3. What Should Indian Businesses Know About E-Commerce and Digital Trade When Selling to EU Customers (Including in Germany)?
When selling online to customers based in the European Union, Indian businesses need to comply with regulations governing access to and selling on the EU’s single digital market. Amongst others, these concern value added tax (VAT), consumer protection laws including laws on product safety, and data protection.
Value Added Tax
Importantly, Indian sellers need to consider distance selling and VAT rules.
If you are shipping goods from India directly to consumers based in the EU (through your website or through online marketplaces), you will be subject to the EU’s distance selling VAT regime and need to pay VAT in the country in which your B2C buyer resides. In order to do so, you need to register for VAT. A non-EU seller of products that have a value of equal to or below EUR 150 can use the Import One-Stop Shop (IOSS) for VAT reporting to pre-collect and remit VAT, which speeds up delivery to customers. This requires an EU intermediary. If the goods imported to the EU have a value above EUR 150, IOSS cannot be used; instead, VAT needs to be paid at customs.
If instead of goods, your business provides services to EU-based consumers (for example, SaaS or downloadable software), those are equally subject to VAT where the consumer is located. Here, another variant of the Non-Union One-Stop Shop system lets you register in one EU country to report VAT for all EU sales.
Consumer Protection Laws, Including Product Safety
In addition to VAT requirements, Indian businesses selling to EU consumers need to comply with the EU member states’ consumer protection laws, including product safety regulations.
Physical goods need to comply with the EU’s CE marking requirements as well as the General Product Safety Regulation requirements. For more information, see below question 4.
In addition, and subject to certain exceptions, EU consumer protection laws require businesses selling their products or services online to provide the consumer with a 14-day cooling off period during which the consumer can change their mind and rescind the contract. This is in addition to other consumer rights like information and return rights.
Data Protection
In addition to consumer protection laws, data protection rules are an important part of the European regulatory landscape. The EU’s General Data Protection Regulation (GDPR) ensures a very high level of personal data protection and applies to every business (EU and non-EU) that offers goods or services to people in the EU.
If your online presence is targeted at EU customers or you have other ways in which you collect personal data from EU residents (such as names, addresses, emails, IP addresses, etc.), you must comply with the GDPR.
Key GDPR principles include
only collecting and processing data if you have one of the legally permissible reasons (legal bases) for doing so; for example, important legal bases are consent or the fulfilment of a contract,
only collecting data that is necessary for the legal basis upon which it is based,
and honoring the data subject’s rights over their data as provided for in the GDPR.
You should post a GDPR-compliant privacy policy on your site, implement proper security measures, and ideally avoid transferring EU personal data to India unless you use appropriate safeguards.
Non-compliance can lead to heavy fines (up to 4% of global turnover or €20 million), so this is a serious aspect for any tech or digital business.
In summary, e-commerce opens up the EU with its approximately 450 million consumers to Indian businesses without a physical presence, but it comes with cross-border VAT obligations, consumer protection and product safety laws as well as data privacy regulations. Hence why obtaining advice from local legal and tax advisers is key to ensuring a successful market entry.
4. What Regulatory Hurdles Might Indian Exporters Face in the EU, and How Can They Overcome Them?
The EU has strict product regulations to protect health, safety, and the environment. Indian companies must ensure their products meet all applicable standards before entering the market.
A primary consideration is CE marking. Many manufactured goods – from electronics and machinery to toys and personal protective equipment – must carry the CE mark, which signifies conformity with EU directives or regulations (e.g. the Machinery Directive, Toy Safety Directive, EMC Directive, etc.).
The manufacturer (even if overseas) is responsible for performing the required conformity assessment (which may involve lab tests or certification by an EU-notified body) and affixing the CE mark. Without a proper CE mark, such products cannot be legally sold in the EU.
Along with the mark, you must prepare an EU Declaration of Conformity and technical documentation. Since July 2021, the EU also requires that CE-marked products have an EU-based contact person (Importer or an Authorized Representative) indicated on the product or packaging. This means if you ship directly without a distributor, you’ll need to appoint an EU representative to handle compliance queries. To overcome this hurdle, engage with certification bodies early, use internationally accredited labs for testing, and consider hiring a consultant familiar with EU standards to guide the compliance process.
If your product or industrial materials contain chemicals, the REACH regulation may apply. Separately, products like electronics are subject to the RoHS rules (restriction of hazardous substances) which provide limits on heavy metals and brominated flame retardants, which you need to adhere to before CE marking.
Labelling requirements are another critical area. The EU mandates specific product labeling – for example, textile products must be labeled with fiber composition in the official language of the destination country, and electronics require markings like the WEEE trash-can symbol and energy efficiency labels for certain devices.
All labels (including safety warnings, ingredient lists, usage instructions) generally must be in the local EU language(s) of the market so consumers can read them. To handle this, plan for multilingual packaging or inserts.
Also pay attention to packaging regulations: the EU has rules on packaging waste and material recycling; you might need to register with local packaging recovery schemes if you’re the “producer” putting packaging on the EU market.
For food, pharma, or cosmetics, additional regulations (like ingredient disclosure, shelf-life dates, health claim rules) apply and often require local representation or notification to authorities. These sector-specific hurdles mean it’s essential to thoroughly research the EU directives/regulations relevant to your product type. The European Commission’s “Product compliance” databases and standards bodies can be valuable resources. Overcoming regulatory hurdles is achievable by proactively obtaining necessary certifications, adapting your product and packaging to EU standards, and frequently consulting EU official guidance. Many Indian companies also hire EU-based compliance experts or use testing labs in Europe to ensure nothing is missed.
The European Union — and Germany in particular — is full of opportunity for Indian businesses ready to take the next step on the global stage. Whether you’re launching a tech startup, scaling a manufacturing business, or selling directly to European consumers, the EU offers a stable, wealthy, and innovation-friendly environment.
Yes, the rules can be complex — but they’re also transparent, predictable, and navigable with the right partners and preparation. This FAQ is just the beginning. With smart planning, strong local relationships, and a proactive approach to compliance, your business can not only enter the EU market — it can thrive there.
So take the leap! The door to Europe is open — and it’s waiting for what your business has to offer.
If you have any questions about any of the above, please feel free to reach out to us for a free initial conversation.
*This publication is for informational purposes only and does not constitute legal advice nor does it create a client-lawyer relationship. It should not be relied on when making decisions without verifying that the facts, law and other considerations mentioned in the publication apply to your concrete situation. Facts matter and vary, and you should not make important decisions without receiving individual professional advice tailored to your specific situation. Please reach out to us if you have any questions about the topics of this publication and we will be happy to help clarify.