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

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 2026 development is the Side-by-Side package, released by the OECD/G20 Inclusive Framework on 5 January 2026. It implements the G7's June 2025 political agreement by 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 electing the SbS Safe Harbor, top-up tax under the Income Inclusion Rule is eliminated and the Undertaxed Profits Rule is deemed zero for their controlled domestic and foreign operations, effective 1 January 2026. The US is currently the only jurisdiction on the Central Record with an Eligible SbS Regime.
• Where a family group IS in scope, the relevant question is the effective tax rate computed jurisdiction by jurisdiction, not entity by entity. A zero-taxed Cayman, BVI or free-zone UAE holding entity inside an in-scope group generates a top-up to 15% somewhere — 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; only the recipient is in question.
• The QDMTT is why the classic offshore jurisdictions themselves enacted 15% top-up taxes — the UAE's Domestic Minimum Top-Up Tax from 1 January 2025, and equivalents in the Cayman-style centres and Bermuda. Faced with the tax being collected somewhere regardless, they chose to collect it themselves. For in-scope groups this means the zero-tax jurisdiction is no longer zero-tax, and the choice of holding location is now about substance and treaty access rather than rate.
• The indirect effect on out-of-scope families is real but second-order. Pillar Two has removed the rate advantage from the top of the market, which has (a) reduced the availability and increased the price of the aggressive structures that used to be built for everyone by analogy to what large groups did, (b) pushed jurisdictions toward substance-based tests that apply to everyone, and (c) 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 an Income Inclusion Rule and a QDMTT for in-scope groups only, deliberately leaving the fund and private-client business outside. Family office structures below the threshold in those jurisdictions are unaffected in substance.

Jurisdiction by jurisdiction

OECD/G20 Inclusive Framework medium

Side-by-Side package released 5 January 2026, implementing the G7's June 2025 agreement. US-parented groups electing the SbS Safe Harbor are excluded from IIR top-up tax and have UTPR deemed zero for controlled domestic and foreign operations, effective 1 January 2026, on the basis that the US NCTI regime adequately taxes domestic and foreign profits. The US is the only jurisdiction with an Eligible SbS Regime on the Central Record.

United Arab Emirates medium

15% Domestic Minimum Top-Up Tax from 1 January 2025 for groups with EUR 750m+ consolidated revenue. Below that threshold the ordinary UAE corporate tax regime applies (0% to AED 375k, 9% above; free-zone 0% only for Qualifying Free Zone Persons on Qualifying Income). For an in-scope group, a UAE free-zone entity's 0% is topped up to 15% by the UAE itself.

Guernsey, Jersey, Isle of Man low

Implemented Pillar Two narrowly — IIR and/or QDMTT for in-scope EUR 750m+ groups only, deliberately preserving the 0% general corporate rate for everything else, including fund and private-client structures. Family office vehicles below the threshold are substantively unaffected. All three are also in the leading CARF group with first exchanges by 2027.

Cayman Islands, BVI, Bermuda medium

Zero-rate jurisdictions where an in-scope group's entities now attract a 15% top-up — collected domestically where a QDMTT has been enacted (Bermuda), or by the parent jurisdiction under the IIR. Combined with economic substance requirements, the historical rate advantage for large groups is gone. For sub-threshold private structures they remain 0% and functional.