Dutch Tax Break Worth Nearly One Billion Euros Goes to US Pharma Giant That Closed Research Operations
Amsterdam, Monday, 13 April 2026.
American pharmaceutical company MSD received €922 million in Dutch innovation tax breaks in 2025, despite shutting down most research activities in the Netherlands. The company closed its main research facility in Oss in 2016, eliminating 1,000 jobs, and moved production to Ireland. MSD now benefits from the 9% tax rate through the ‘innovatiebox’ system simply by holding patents in a Dutch subsidiary, while contributing minimal innovation or employment to the country.
Three Companies Dominate Dutch Innovation Tax Benefits
The Netherlands’ innovation tax incentive system has become heavily concentrated among three multinational corporations. Research conducted by the Financieele Dagblad and Trouw revealed that approximately 90% of the €2.9 billion in innovation tax breaks distributed in 2025 went to just three companies: chip machinery manufacturer ASML, pharmaceutical giant MSD, and online travel platform Booking.com [1]. This concentration stands in stark contrast to the program’s original design, which aimed to broadly stimulate research and development activities across Dutch industry. While government statistics show that 80% of companies using the innovatiebox are classified as small and medium enterprises, these large corporations absorb 95% of the total tax benefits [2].
MSD’s Massive Tax Savings Through Patent Strategy
MSD’s €922 million tax reduction in 2025 represents one of the largest single innovation tax breaks ever awarded under Dutch law [1]. The pharmaceutical company has accumulated approximately €4 billion in Dutch tax savings since 2019, primarily attributed to revenues from its blockbuster cancer medication Keytruda [1]. The drug’s global sales reached €27 billion in 2025, with income strategically channeled through the Netherlands to benefit from the 9% corporate tax rate under the innovatiebox ruling, compared to the standard 25% rate [3][4]. This arrangement allows MSD to maintain the Keytruda patent in a Dutch subsidiary while conducting minimal actual research operations in the country.
Research Operations Moved Despite Tax Benefits
The disconnect between MSD’s tax benefits and its actual Dutch operations has drawn sharp criticism from tax law experts. Professor Jan van de Streek of tax law stated, “This is absolutely not what the innovation box is meant for. We don’t have the laboratories, the high-value jobs and the investment that we want. The fact that we are taxing this company’s global income at a lower tariff is doing nothing for our investment climate” [1]. MSD closed its primary research division in Oss in 2016, eliminating 1,000 positions where Keytruda was originally developed [1][2]. The company subsequently moved production operations to Ireland, maintaining only a veterinary research department in Boxmeer and approximately 4,000 total employees across the Netherlands [1][2].
Political Pressure Mounts for Reform
The revelation of MSD’s substantial tax benefits has triggered political scrutiny of the innovatiebox system. On April 12, 2026, members of Parliament from Progressief Nederland announced plans to seek ministerial explanations regarding the tax arrangements [1]. GroenLinks-PvdA representative Luc Stultiens characterized such extensive tax breaks for large corporations as “not at all explainable,” with his party advocating for the abolition of what they term “ineffective tax breaks” to redirect funds toward “real innovation” [4]. However, the finance ministry defended the program on April 12, 2026, stating that evaluations demonstrated the system “largely achieved its aims” and confirming the current government’s intention to continue the tax incentive [1]. The Centraal Planbureau and Wetenschappelijke Raad voor Regeringsbeleid have previously criticized the innovation tax system for primarily benefiting a small group of well-established, successful companies rather than fostering broader innovation [1][4].