Introduction: The First Step is the Easiest

Setting up a Dutch BV is the easy part. Staying and succeeding in Europe is where the real challenge begins.

When Indian companies think about expanding into Europe, the Netherlands almost always comes up first. The reasons are clear: its strategic location, English-friendly business culture, and its role as a bridge to Europe. Over the past two decades, giants from Tata Steel to Infosys have used the Netherlands as their European base.

But here’s the reality: market entry isn’t just about incorporating a company and hiring staff. Europe has become one of the most tightly regulated regions in the world. Compliance is no longer a back-office task—it’s a strategic priority.

In our work with Indian multinationals, we see this as a compliance triangle. To succeed in Europe today, firms must simultaneously navigate three interlinked dimensions:

1. Tax and Trade: The complex dynamics between India and the EU.

2. ESG Regulations: The new standards reshaping global business.

3. Dutch Statutory Filing: The accounting rules that anchor all reporting.

Each is complex on its own. Together, they form the backbone of Europe Entry 2.0.

The Tax & Trade Dimension: More Than Just Tariffs

For Indian exporters, the first question is often about duties. Yet the real picture is far more layered.

The FTA Challenge
The EU and India don’t yet have a comprehensive Free Trade Agreement. This means tariffs still apply across sectors from textiles to machinery. Add to this anti-dumping duties (e.g., on steel products), and the competitiveness of Indian exports can be significantly altered.

Leveraging the DTAA
A critical tool is the India–Netherlands Double Taxation Avoidance Agreement (DTAA). It prevents double taxation on the same income for companies with Dutch affiliates. But unlocking its benefits for dividends, royalties, and interest requires careful structuring.

The Transfer Pricing Tightrope
This is a major focus area. Indian IT and pharma firms often price services or IP transfers between HQ and EU subsidiaries. Both Indian and EU tax authorities scrutinize these arrangements to ensure they reflect true “arm’s length” values.

Case Study – Infosys: Infosys has long used the Netherlands as its European base. The company proactively restructured its intra-group pricing policy in line with OECD principles. This not only reduced disputes with tax authorities but also strengthened its reputation for transparency with European clients and investors, turning compliance into a trust-building exercise.

ESG: Europe’s New Business License

If tax is the financial gatekeeper, ESG is the moral and legal compass.

The EU’s Corporate Sustainability Reporting Directive (CSRD) applies to non-EU firms with significant European operations. This means many Indian firms with Dutch entities must soon disclose ESG metrics with the same rigor as financial reports.

But it's more than disclosure. Companies must measure and manage their carbon footprint, supply chain ethics, and governance. Crucially, this data requires independent assurance—just like a financial audit.

Case Study – Tata Steel: With its major plant in IJmuiden, Tata Steel faced significant pressure from EU emissions regulations and the Carbon Border Adjustment Mechanism (CBAM). In response, it announced a monumental €65 billion decarbonisation plan, including a shift to hydrogen-based steelmaking. This move wasn’t just about compliance—it positioned Tata as a long-term, sustainable supplier to European industries, safeguarding its market access for decades.

Case Study – Tech Mahindra: Tech Mahindra integrates ESG targets directly into its European operations, aligning with EU sustainability frameworks early. By embedding renewable energy sourcing and carbon neutrality goals in its offices, it anticipates regulatory demands and uses its sustainability leadership as a key differentiator to win clients.

And the regulatory bar is continually being raised. The EU’s Green Deal means ESG is no longer a “soft” issue—it is literally becoming a license to operate.

Dutch Statutory Filing: The Hidden Backbone of Compliance

While tax and ESG grab headlines, the day-to-day reality of operating in the Netherlands rests on meticulous statutory filings.

Every Dutch company must file annual accounts with the Dutch Chamber of Commerce (KvK), complying with one of two standards:

• Dutch GAAP: Simpler and suitable for smaller entities.

• IFRS: More complex but required for listed and large multinational firms.

The choice impacts valuation, disclosure, and consolidation rules. Many Indian CFOs underestimate the effort required to align Indian practices with these standards.

Then there’s SBR (Standard Business Reporting), the mandatory digital filing platform. This requires not just accurate data but also technical system compatibility.

Case Study – Wipro: Wipro invested in robust financial reporting systems for its Dutch subsidiary, ensuring alignment with both IFRS and SBR requirements. By digitising and streamlining this process early, Wipro reduced long-term compliance costs, built a robust audit trail, and reinforced its reputation for flawless governance with European regulators and clients.

The risks of neglect are real: fines, director liability, and reputational damage that can undo years of work building credibility.

Why the Three Legs of the Triangle Are Inseparable

It’s a mistake to treat tax, ESG, and filing as separate checkboxes. In practice, they are deeply interconnected:

• Tax & ESG Incentives: The Dutch government offers tax breaks for sustainable investments. Smart structuring can reduce your tax burden while boosting your ESG score.

• ESG Data Feeds Filings: ESG disclosures are now part of the annual report, forcing CFOs and sustainability officers to collaborate closely.

• Spillover Risk: An error in transfer pricing can trigger wider scrutiny of your financial and ESG reporting,放大ing a single issue into a major crisis.

Think of it as a three-legged stool—if one leg is weak, the entire structure collapses.

Example: A global Indian manufacturer faced delays in ESG data collection, which caused late statutory filings in the Netherlands. A sustainability issue quickly escalated into a compliance failure, affecting financial reporting and shaking investor confidence.

The Markets & Partners View: From Compliance Burden to Strategic Advantage

At Markets & Partners, we see the compliance triangle not as a burden, but as your biggest opportunity in Europe.

Mastering it delivers three strategic advantages:

1. Investor Trust: Transparent tax structures and robust ESG reporting attract European capital.

2. Client Confidence: Demonstrating compliance with EU standards wins the trust of customers and partners.

3. Operational Resilience: Proactive governance reduces the risk of costly regulatory surprises.

In other words, compliance becomes a competitive advantage.

Our role is to help Indian companies connect the dots between tax strategy, ESG readiness, and reporting obligations. By doing so, firms don’t just enter the European market; they thrive in it.

Conclusion: It’s Time for Europe Entry 2.0

The old model of European expansion was simple: set up a BV, hire local staff, and build a customer base. That model is obsolete.

The new model—Europe Entry 2.0—requires mastering the compliance triangle. It demands that Indian firms think not only about market access but also about long-term credibility, resilience, and strategic growth.

For Indian companies eyeing Europe, the message is clear: market entry is only the beginning. The real journey is about turning compliance into strategy. Those who do will not just survive Europe’s regulatory maze—they will lead within it.

✍️ This piece is part of Markets & Partners’ ongoing reflections on India–Europe business strategy. For more insights on navigating European regulations and opportunities, explore our advisory work at the intersection of trade, investment, and compliance.