Quick Answer
In January 2026, the EU and India reached political agreement on the core chapters of a future EU–India Free Trade Agreement (FTA) — one of the most significant trade deals globally. The agreement is not yet in force, but companies should already begin preparing by reviewing their supply chains, transfer pricing policies, and corporate structures.
A Strategic Shift in EU–India Relations
Negotiations between the European Union and India reached a major milestone in late January 2026, with political agreement announced on what has been described as the “mother of all trade deals.”
If implemented, this agreement would connect two of the world’s largest economies, creating one of the most significant free trade areas globally. It reflects a broader EU strategy to diversify global trade relationships, reduce dependency on single markets, and strengthen long-term supply-chain resilience.
The European Commission has published an official overview of the EU–India trade agreement, including the current status of negotiations and agreed policy direction.
What the EU–India FTA Covers (High-Level Overview)
While not yet legally binding, the political agreement defines the future framework of EU–India economic cooperation.
Trade in Goods
- EU side:
- Approximately 99% of tariffs eliminated, with phased reductions for sensitive sectors such as cars and selected agricultural products.
- India side:
- Approximately 97% of EU goods covered, with estimated annual tariff savings of around €4 billion for EU exporters.
- Improved customs cooperation and trade facilitation measures.
Trade in Services
- Improved market access for EU providers in financial, maritime, and telecommunications services.
- Commitments on regulatory transparency and non-discrimination.
- Dedicated SME contact points and improved access to information, aimed at reducing barriers for smaller businesses.
Investment Protection
- Clearer and more predictable rules for cross-border investments.
- Safeguards against arbitrary or discriminatory measures.
Sustainable Development
- Commitments linked to labour standards.
- Environmental and climate cooperation aligned with international frameworks.
Importantly, none of these provisions are yet applicable. Legal review, ratification, and implementation are still required.
Timeline: When Could the Agreement Enter into Force?
Based on current EU practice:
- Legal review and ratification: approximately 5–6 months
- Practical implementation: around 12 months thereafter
A realistic expectation for entry into force would therefore be 2027–2028, although preparatory business planning should begin well in advance.
Why This Matters for EU-Based Businesses
For EU companies trading with or investing in India, the agreement signals:
- Reduced long-term trade costs
- Improved predictability for cross-border operations
- Greater confidence for investment and outsourcing decisions
At the same time, increased activity often triggers additional obligations in areas such as:
- Permanent establishment (PE) risk
- Transfer pricing documentation
- Customs valuation and indirect tax coordination
- Operational substance and governance
For many EU-based groups, effective preparation will require coordination between advisors in multiple EU jurisdictions and India, rather than country-by-country decisions.
Trade agreements reduce friction — they do not remove compliance complexity.
Why This Matters for Indian Companies Entering the EU
Indian companies expanding into the EU may benefit from:
- Easier market access
- Gradual reduction of customs barriers
- Greater legal certainty
However, operating in the EU still requires careful handling of:
- Corporate and indirect tax compliance
- VAT registration and reporting
- Payroll and employment obligations
- Transfer pricing and group documentation
The FTA opens doors — but structure and compliance determine success.
Implications for Bulgaria-Based Structures
For businesses using Bulgaria as an EU base, the agreement further strengthens Bulgaria’s role as a cost-efficient EU gateway.
Bulgaria already offers:
- Competitive corporate taxation
- Full access to the EU single market
- Strong IT, shared services, logistics, and warehousing capacity
For Indian companies in particular, a Bulgarian entity can serve as a practical base to:
- Warehouse and distribute goods across the EU
- Perform light manufacturing or assembly
- Provide IT, back-office, and support services EU-wide
This positioning is further supported by the existing Bulgaria–India Double Tax Treaty, which already provides a framework for reducing withholding taxes on dividends, interest, and royalties — subject to proper structuring and sufficient substance.
For readers who want a broader explanation of how double tax treaties work in practice — including permanent establishment rules, withholding taxes, and common misunderstandings — we have published a separate guide on double tax treaties.
Working with Our Aliant+ Partner in India
Cross-border operations only work when local expertise exists on both sides.
Aidos is a member of the Aliant+ Global Network, an international alliance of independent accounting, tax, and legal firms supporting clients worldwide.
Through Aliant+, we work closely with our Indian partner firm, KrayMan, a multidisciplinary advisory firm in India with strong experience in tax, accounting, regulatory, and cross-border advisory.
This cooperation allows us to support clients with:
- Coordinated EU–India tax and accounting advice
- Alignment of group structures and transfer pricing positions
- Local compliance support in both jurisdictions
- Practical, real-world coordination — not abstract theory
With EU–India trade gaining momentum, many European firms are also seeing increased client interest in country-specific Double Tax Treaty (DTT) applications, making this a natural area for local expertise across the Aliant+ network.
Trade agreements define the framework. Trusted local partners make them workable in practice.
Frequently Asked Questions (FAQ)
Is the EU–India Free Trade Agreement already in force?
No. Political agreement was reached in January 2026, but the agreement is not yet legally binding and remains subject to formal ratification and implementation.
When is the EU–India FTA expected to apply?
Following legal review and ratification, a realistic timeline for entry into force is 2027–2028.
Will the FTA eliminate all customs duties?
No. Most tariffs will be reduced or eliminated gradually, with transitional periods and exclusions for sensitive sectors.
Does the agreement remove tax obligations?
No. National tax laws and double tax treaties remain fully applicable. Corporate income tax, withholding tax, VAT, and transfer pricing rules are not replaced by the FTA.
Will the FTA increase transfer pricing and PE risks?
Yes. Increased transaction volume and more integrated operations can increase permanent establishment exposure and make robust transfer pricing documentation essential.
Is the agreement relevant for SMEs?
Yes. SMEs benefit from simplified trade procedures, but they also face proportionally higher compliance risk if structures are not properly aligned.
How Aidos Can Support
Aidos assists companies operating across borders with practical, coordinated tax and accounting support, particularly in EU–non-EU contexts.
Together with our Aliant+ partner firm in India, we help clients:
- Structure operations to be FTA-ready
- Optimise EU and Indian tax positions
- Coordinate accounting, reporting, and compliance
- Anticipate risks before they become costly issues
If your business is active between the EU and India — or considering expansion — early preparation can prevent rushed and expensive adjustments later.
👉 You are welcome to contact us to discuss your specific situation.
Disclaimer
This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. The EU–India Free Trade Agreement is not yet in force and remains subject to formal approval and implementation. Professional advice should be obtained before taking action.
Last reviewed and updated: February 2026
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