OECD BEPS Pillar Two GloBE: Family Office Guide

The OECD's Base Erosion and Profit Shifting (BEPS) Pillar Two framework, commonly called the Global Anti-Base Erosion (GloBE) rules, establishes a coordinated global minimum effective tax rate of 15% on the profits of large multinational enterprises. Countries that have enacted domestic legislation implementing GloBE, including EU member states, the United Kingdom, Japan, Canada, and others, began applying the rules to fiscal years starting on or after 1 January 2023, with certain additional charging mechanisms phasing in subsequently. The framework operates through two interlocking rules: the Income Inclusion Rule (IIR), which allows a parent entity's jurisdiction to impose a top-up tax when a subsidiary is taxed below 15%, and the Undertaxed Profits Rule (UTPR), a backstop applied where the IIR does not fully capture low-taxed income.

For family offices, the central question is whether the consolidated group, encompassing the family holding structure, operating entities, and any investment vehicles, meets the revenue threshold that triggers GloBE obligations. The rules target groups whose consolidated annual revenues exceed a materially high threshold established in the OECD model rules, which most implementing jurisdictions have mirrored. Entities below that threshold are excluded, but family offices managing complex, multi-jurisdictional holding structures with operating businesses should not assume exclusion without analysis. Domestic Minimum Top-up Taxes (DMTTs), adopted by many jurisdictions, add another compliance layer by allowing a country to collect top-up tax locally before the IIR applies at the parent level.