The OECD's Pillar Two framework — the global minimum tax — is widely described as a rule for multinationals. Technically, that is correct: the 15% global minimum tax applies to multinational enterprise groups with annual consolidated revenues above €750 million. Most family offices fall well below that threshold.
But "technically not in scope" is not the same as "unaffected." The indirect consequences of Pillar Two for high-net-worth structures are real and are already being felt in 2025. Here is what family offices with cross-border holdings actually need to understand.
What Pillar Two Actually Is
Pillar Two is a coordinated international framework that ensures large multinational corporations pay a minimum 15% effective tax rate in every jurisdiction where they operate. It works through two primary mechanisms. The Income Inclusion Rule (IIR) requires a parent entity to pay a top-up tax if a subsidiary's effective rate falls below 15% in a given jurisdiction. The Undertaxed Profits Rule (UTPR) is a backstop that allows other jurisdictions to collect any remaining top-up tax not collected under the IIR.
Over 140 countries have committed to implementing Pillar Two. As of 2025, the EU member states, UK, Switzerland, Canada, Japan, Australia, and Singapore have enacted domestic legislation. The UAE and several Caribbean jurisdictions are implementing Qualified Domestic Minimum Top-up Taxes (QDMTTs) — essentially, they collect the top-up themselves before a foreign jurisdiction can do so. The practical effect is that zero-tax outcomes are now subject to a floor, and the floor is enforced domestically in most major offshore centers.
Which Family Office Structures Are In Scope
The €750 million consolidated revenue threshold means that single-family offices operating below that scale are not directly subject to Pillar Two's IIR or UTPR. A family office managing €200 million in assets — even with complex multi-jurisdictional structures — is not a covered entity under the current framework. This is the straightforward answer, and it is correct as far as it goes.
The indirect exposure, however, is real. Portfolio companies and operating businesses in which the family office holds significant interests may themselves be subject to Pillar Two — either as part of a larger consolidated group if the family's total group revenues exceed €750 million, or through QDMTTs enacted in the jurisdictions where those businesses operate. A family office with significant holdings in UAE free zone entities, Irish holding companies, or Cayman-domiciled funds needs to assess whether those entities' effective tax rates are subject to QDMTT top-ups — regardless of whether the family office itself is a covered entity.
The Top-Up Tax in Practice
A jurisdiction-level effective tax rate below 15% triggers a top-up tax obligation. Under a QDMTT, the jurisdiction itself collects the top-up before a foreign IIR can apply — so the tax is paid to the jurisdiction of the low-tax entity, not to the parent's home country. The UAE's implementation of a QDMTT ensures that any top-up tax on UAE-resident entities flows to the UAE Treasury rather than to the US IRS or HMRC.
For family offices with operating entities in zero-tax or low-tax jurisdictions, this means the effective tax floor is rising. A UAE free zone entity generating $5 million in annual income may now face a QDMTT top-up to reach the 15% threshold. The planning advantage of zero-tax jurisdictions has not disappeared — the QDMTT payment stays within the jurisdiction — but the absolute zero-rate assumption is no longer valid for any entity with meaningful revenues. Structures that were designed around 0% outcomes need to be revisited with the QDMTT overlay applied.
Three Planning Strategies That Remain Effective
1. Substance-Based Income Exclusion (SBIE). Pillar Two includes a carve-out for income attributable to genuine payroll and tangible assets. The SBIE reduces the income subject to the top-up calculation by a percentage of covered tangible assets and covered payroll costs. For family offices with genuine operating businesses employing local staff and holding real assets, the SBIE can materially reduce or eliminate top-up tax exposure. The lesson here is quantifiable: substance is not just a regulatory requirement in the post-Pillar-Two environment — it is a direct reduction in the top-up tax base. Building real economic activity into offshore structures now yields a measurable financial return.
2. Qualified Refundable Tax Credits (QRTCs). Certain government-granted tax credits that are refundable or result in cash payments are treated as income under Pillar Two rather than as a reduction in taxes paid — meaning they do not reduce the effective tax rate for minimum tax purposes. Family offices investing in jurisdictions with significant refundable credit programs (US Inflation Reduction Act credits, certain Irish R&D credits) should work with advisors to ensure those credits are correctly characterized under the GloBE rules, as mischaracterization can either overstate or understate Pillar Two exposure.
3. Portfolio Diversification Across Pillar-Two-Compliant Jurisdictions. The most durable planning strategy is ensuring that operating entities in low-tax jurisdictions generate income that qualifies for the SBIE or other exclusions, while structuring intermediate holding companies in jurisdictions — Ireland, Netherlands, Singapore, Luxembourg — with robust domestic Pillar Two frameworks. This is not about avoiding the minimum tax; it is about ensuring structures are architecturally fit for the post-Pillar-Two environment. Structures that work only in a world without QDMTTs are no longer viable.
The Bottom Line for Family Offices
If your consolidated revenues are below €750 million, Pillar Two does not directly apply to your family office entity. But the jurisdictions where your assets sit are now implementing QDMTTs that affect the effective tax rate of underlying entities. The window for rearchitecting structures that rely on zero-rate outcomes is not closed, but it is narrow. 2025 is the year to review and adapt — not to react after the first QDMTT assessment arrives.