Tax intelligence

Pillar Two in 2026: what it does and does not do to family capital

The global minimum tax applies to groups with EUR 750m+ consolidated revenue, which excludes almost every family office by design. The reason it matters anyway is that it has repriced the low-tax holding company as a concept. January 2026 brought the largest change to the regime since it was agreed.

Last verified July 2026

What is actually true

  • The threshold is the first and most important fact. Pillar Two applies to multinational enterprise groups with annual consolidated revenue of at least EUR 750m in at least two of the four preceding fiscal years. The overwhelming majority of family offices, founders and mid-market groups are outside it entirely. A great deal of advisory alarm on this topic is being sold to people it cannot touch.
  • The big development for 2026 is the Side-by-Side package, released by the OECD/G20 Inclusive Framework on 5 January 2026. It puts into practice the G7's June 2025 political agreement, recognising the US tax system, specifically the NCTI regime that replaced GILTI under the One Big Beautiful Bill Act, as an Eligible Side-by-Side Regime. For US-parented groups that elect the SbS Safe Harbor, top-up tax under the Income Inclusion Rule is eliminated. The Undertaxed Profits Rule is deemed zero for their controlled domestic and foreign operations, effective 1 January 2026. Right now, the US is the only jurisdiction on the Central Record with an Eligible SbS Regime.
  • When a family group falls within scope, the question that matters is the effective tax rate, calculated jurisdiction by jurisdiction, not entity by entity. A zero-taxed Cayman, BVI or free-zone UAE holding entity inside an in-scope group still generates a top-up to 15% somewhere. It gets collected by the parent jurisdiction under the IIR, by the source jurisdiction under a Qualified Domestic Minimum Top-Up Tax, or as a backstop under the UTPR. The tax gets paid. The only open question is who collects it.
  • The QDMTT is the reason the classic offshore jurisdictions enacted their own 15% top-up taxes. The UAE brought in its Domestic Minimum Top-Up Tax from 1 January 2025, and the Cayman-style centres and Bermuda introduced equivalents. Faced with the fact that the tax would be collected somewhere regardless, they chose to collect it themselves. For in-scope groups, this means the zero-tax jurisdiction is no longer zero-tax. The choice of holding location is now about substance and treaty access, not rate.
  • The indirect effect on out-of-scope families is real, but it is second-order. Pillar Two has removed the rate advantage from the top of the market. That has done three things. It has reduced the availability of the aggressive structures once built for everyone by analogy to what large groups did, and made them more expensive. It has pushed jurisdictions toward substance-based tests that apply to everyone. And it has made the substance-based income exclusion, a carve-out computed on payroll and tangible assets, the template for what real presence now means. Families holding an operating business that grows past EUR 750m will cross into scope, and the structure they built at EUR 200m will not survive it.
  • Guernsey, Jersey, the Isle of Man and similar centres have implemented Pillar Two selectively. Typically that means an Income Inclusion Rule and a QDMTT for in-scope groups only, with fund and private-client business deliberately left outside. Family office structures below the threshold in those jurisdictions are unaffected in substance.

Jurisdiction by jurisdiction

OECD/G20 Inclusive Framework medium
The Side-by-Side package was released on 5 January 2026, implementing the G7's June 2025 agreement. US-parented groups that elect the SbS Safe Harbor are excluded from IIR top-up tax. Their UTPR is deemed zero for controlled domestic and foreign operations, effective 1 January 2026, on the basis that the US NCTI regime already taxes domestic and foreign profits adequately. The US is the only jurisdiction with an Eligible SbS Regime on the Central Record.
United Arab Emirates medium
Starting 1 January 2025, a 15% Domestic Minimum Top-Up Tax applies to groups with EUR 750m+ consolidated revenue. Below that threshold, the ordinary UAE corporate tax regime applies. That means 0% up to AED 375k and 9% above it, with the free-zone 0% rate reserved for Qualifying Free Zone Persons on Qualifying Income. For a group that is in scope, though, a UAE free-zone entity's 0% rate gets topped up to 15% by the UAE itself.
Guernsey, Jersey, Isle of Man low
The three implemented Pillar Two narrowly. The IIR and QDMTT, or both, apply only to in-scope groups above EUR 750m, and the general 0% corporate rate stays intact for everything else, including fund and private-client structures. Family office vehicles below the threshold are essentially untouched. All three are also part of the leading CARF group, with first exchanges due by 2027.
Cayman Islands, BVI, Bermuda medium
These are zero-rate jurisdictions where an in-scope group's entities now face a 15% top-up. That tax gets collected domestically where a QDMTT is in place, as in Bermuda, or by the parent jurisdiction under the IIR. Combined with economic substance requirements, the old rate advantage for large groups is gone. For structures below the threshold, though, the 0% rate still applies and still works.
What can go wrong
  • Check the threshold before you pay for advice. The EUR 750m consolidated revenue test, measured across two of the four preceding years, excludes the overwhelming majority of family offices. A lot of Pillar Two anxiety is being sold to people who are not actually in scope.
  • The test is revenue, not wealth. A family office managing USD 5bn in securities with no operating revenue generally falls outside the scope. A family-owned manufacturer with EUR 800m of turnover and modest margins falls inside it. The test tracks the wrong variable for private wealth, which is exactly why it misses most of it.
  • The Side-by-Side package is new. It was released on 5 January 2026 and is effective from that date. It benefits US-parented groups specifically. Non-US-parented groups get nothing from it, and the political durability of a carve-out negotiated for one country is genuinely uncertain.
  • A growing operating business will cross the threshold, and the structure built below it will not survive the crossing. If a family holds a business plausibly heading past EUR 750m, the holding structure needs to be designed for the regime it will be in, not the one it is in.
  • Substance requirements now apply well below the Pillar Two threshold. Economic substance rules in the offshore centres, CFC rules at home and general anti-abuse provisions catch structures that Pillar Two never reaches. Do not read out of scope for Pillar Two as unchallengeable.
  • Jurisdictions that enacted QDMTTs did so to keep the revenue, not to help you. The top-up gets collected either way. The QDMTT simply determines which government banks it.

Frequently asked

Does the 15% global minimum tax apply to my family office?

Almost certainly not. Pillar Two reaches only multinational groups with annual consolidated revenue of at least EUR 750m in at least two of the four preceding fiscal years. The overwhelming majority of family offices, founders and mid-market groups fall outside it by design. Check the threshold before buying advice. Much of the anxiety on this topic is being sold to people the regime cannot touch.

Is the threshold based on my wealth or my income?

Revenue, not wealth. A family office managing USD 5bn of securities with no operating turnover is generally out of scope. A family-owned manufacturer with EUR 800m of turnover and modest margins is in. The test tracks the turnover of an operating group. That is precisely why it misses most private wealth. It measures the wrong variable for a pure investment vehicle.

Is an offshore holding company in Cayman, BVI or the UAE still worth it?

It depends on scale. Below EUR 750m, these jurisdictions remain 0% and functional. Inside an in-scope group, a zero-taxed Cayman, BVI or UAE free-zone entity now generates a top-up to 15% somewhere. The parent collects it under the IIR, the source jurisdiction collects it under a QDMTT, or it applies as a backstop under the UTPR. The UAE has levied a 15% Domestic Minimum Top-Up Tax since 1 January 2025. For large groups, the rate advantage is gone. The choice now comes down to substance and treaty access.

What does the US exemption from Pillar Two actually mean?

The OECD's Side-by-Side package, released on 5 January 2026, recognises the US NCTI regime, which replaced GILTI under the One Big Beautiful Bill Act, as an Eligible Side-by-Side Regime. US-parented groups that elect the SbS Safe Harbor face no top-up under the Income Inclusion Rule. Their controlled operations also have the UTPR deemed zero, effective 1 January 2026. The benefit applies specifically to US-parented groups. Non-US-parented groups get nothing, and QDMTTs still apply. The US is currently the only jurisdiction on the Central Record.

If I'm out of scope for Pillar Two, is my structure safe?

No. Being out of scope for Pillar Two does not mean a structure is beyond challenge. Economic substance rules in the offshore centres, CFC rules in your home country and general anti-abuse provisions catch structures the global minimum tax never reaches, and substance requirements now apply well below the EUR 750m threshold. Pillar Two has also pushed jurisdictions toward substance-based tests that apply to everyone. The regime is one constraint among several, not a clearance.

My business is growing. What happens when it passes EUR 750m?

It crosses into scope, and the structure built below the threshold will not survive the crossing. A zero-tax holding location that worked at EUR 200m of turnover generates a top-up to 15% once the group is in scope. If a family holds an operating business plausibly heading past EUR 750m, the holding structure should be designed for the regime it will be in, not the one it is in today.

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