Is Pfizer Avoiding Taxes via the Netherlands?—Find Out How.

Legal concept explained in simple terms

This article gives a simple summary of the legal concept that allowed Pfizer to save billions on taxes.

Pleasure doing business in the Netherlands

The Netherlands is notoriously known for suitable jurisdiction for certain legal constructs among the tax professionals in Europe. There are some estimates that say that as much as 30% of all capital leaving Europe goes through the Netherlands. The recent report of the Tax Justice Network (available here) ranks the Netherlands as the fourth greatest tax haven for corporations right after the Cayman Islands. Now it may be argued that this data lacks accuracy; nevertheless, it is indisputable that numerous corporations are using a Dutch subsidiary to move profits up the corporate structure outside of Europe.

Limited partnerships (LP’s) in Europe

In Europe, it is not uncommon that partnerships as a legal entity are eligible to own property—that means they have a status of a legal subject for the purposes of civil law and therefore can exercise civil rights such as ownership; at the same time, however, they are considered “non-existent” (or transparent) for the purposes of tax law. Any tax duties are not carried by the partnership, but by its partners instead. This construct was mostly meant to enable individuals and small investors to pool resources and launch projects with a clear definition of liability and property rights, in a simplified way—i.e. without the need to establish a corporation right away.

The “old good” LP-LLC scheme

It is nothing genius or even new—this concept has been recycled by many companies over years. The LP-LLC scheme utilizes the different tax treatments of limited partnerships in different jurisdictions. The different classification of the LP leads to a “confusion” as to which entity—i.e. either the partnership or the partners—should pay taxes.

Losing battle?

In 2018 the USA has implemented further rules to combat hybrid structures as such the LP-LLP. In Europe, a mandatory disclosure regime was introduced which forces companies to disclose aggressive tax arrangements—a part of the large long-term OECD initiative to battle tax avoidance. Additionally, the Netherlands is considering a withholding tax on such arrangements starting 2024. This certainly makes tax-dodging more difficult, but—considering the more current financial reports—as of today it is still quite possible.

 For all we know, a smart tax lawyer will find a new, even bigger loophole in tax legislation, and we’ll be back at square one.

Jan Vleggeert, professor in tax law at Leiden University, (quote from—see link)


The LP-LLC tax scheme used by Pfizer in the Netherlands is nothing new and has been used by many companies for years. The main aspect of this tax arrangement is a European limited partnership (LP) that owns the intellectual property of the enterprise and collects fees from other subsidiaries. In multiple European countries such as the Netherlands, the LP is not legally considered a tax subject. Consequently, the partners, not the LP, are liable for tax from the European perspective. However, under circumstances, the partners cannot be taxed directly in Europe if they have a foreign tax residence and the country of the partners’ origin may omit to tax these incomes as they attribute these to the European partnership.

Please note that this article is illustrative and cannot provide all specifics regarding this topic. Your case may differ. We always recommend consulting an experienced specialist before making decisions.

Further reading…

  • The New York Times, Pfizer’s Big Breakthrough: Global Tax Avoidance (2015)—link
  • Dutch Review, Pfizer uses Netherlands to shield billions in profits from tax (2021)—link
  • Follow the Money, Pfizer avoids taxes via the Netherlands and makes a profit worth billions (2021)—link
  • NL Times, Netherlands to get tougher on tax avoidance with new withholding tax (2021)—link

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