OECD BEPS Pillar Two: How It Affects Structures Managed by CSPs

What Is Pillar Two?

The OECD's Pillar Two framework — formally the Global Anti-Base Erosion Rules (GloBE) — establishes a global minimum effective tax rate of 15% for large multinational enterprise (MNE) groups. Any MNE group with consolidated revenues exceeding €750 million that has entities in jurisdictions where the effective tax rate falls below 15% faces a top-up tax, collected either by the entity's home jurisdiction through a Qualified Domestic Minimum Top-up Tax (QDMTT) or by the parent entity's jurisdiction through the Income Inclusion Rule (IIR).

Pillar Two entered into force in the EU, the UK, and a range of other jurisdictions in 2024, and more jurisdictions are implementing it on a rolling basis. For CSPs, this matters because many of the structures they administer — offshore holding companies, special purpose vehicles, IP holding entities — are located in jurisdictions where corporate tax rates are zero or low. Where those entities are part of an MNE group meeting the revenue threshold, Pillar Two creates new tax reporting obligations and potentially changes the economics of the structure.

The Scope Question: Which Entities Are In?

The first practical question for any CSP reviewing their portfolio against Pillar Two is whether any of the entities they administer form part of an MNE group with €750 million+ consolidated revenues. Many offshore entities are specifically designed to be outside large MNE group structures — they are genuinely standalone, family-wealth vehicles rather than profit-shifting tools within a multinational corporate group.

However, CSPs should not assume their entire portfolio is out of scope. The GloBE rules apply based on the consolidated group revenues of the ultimate parent entity, not the revenue or assets of the offshore entity itself. A small BVI holding company with no staff and minimal activity may be part of an MNE group that clearly meets the threshold. The only way to know is to understand each client's full group structure.

Why CSPs May Not Always Know

This is a practical challenge for many CSPs: you administer a BVI entity and know it is a subsidiary of a larger group, but you may not know the consolidated revenue of that group. This is not unusual — CSPs are not typically privy to consolidated financial statements. But Pillar Two creates an incentive to understand this better. If an entity in your portfolio is within scope, its tax reporting obligations change, the economic rationale for its structure may change, and clients may need restructuring advice that you should be positioned to provide or refer.

The GloBE Information Return

MNE groups within scope of Pillar Two must file a GloBE Information Return (GIR) — a standardised reporting document that discloses information about each entity in the group, its jurisdiction, its effective tax rate, and the calculation of any top-up tax. The GIR is modelled on the Country-by-Country Reporting (CbCR) framework that many large MNEs already file, but with significantly more granular effective tax rate data.

For CSPs, the GIR creates potential administrative obligations in two ways: first, if the CSP itself is part of a large group (relevant for CSPs that are subsidiaries of financial conglomerates), and second, if CSP clients need administrative support in preparing the entity-level data required for their group's GIR. Understanding what data your clients' tax teams will need from you — financial data, entity information, local tax payments — allows you to prepare proactively rather than scrambling when the request arrives.

"Pillar Two is primarily a client advisory issue for most CSPs, not a direct filing obligation. But CSPs that understand the framework can add significant value to clients navigating GloBE compliance — and those that don't will be caught off guard when the requests start arriving."

Substance Over Structure: The CSP's New Narrative

One of the most significant indirect effects of Pillar Two on the CSP sector is the shift it drives in how clients think about offshore structure design. Offshore structures whose principal economic rationale was tax arbitrage — locating profits in zero-tax jurisdictions within a multinational group — become less valuable when a minimum 15% tax rate applies regardless of jurisdiction. This is already driving restructuring activity among larger multinational clients.

For CSPs, this restructuring activity represents both challenge and opportunity. Entities that clients choose to collapse or migrate will need wind-down services. New structures designed to achieve legitimate non-tax objectives — operational efficiency, regulatory access, family wealth planning — will require careful administration. The CSPs best positioned to support this transition are those who understand the Pillar Two framework well enough to advise intelligently alongside their clients' tax advisers.

Jurisdictions Adopting Pillar Two: The CSP Map

Understanding which of your key jurisdictions have adopted or are implementing Pillar Two shapes how you advise clients and what compliance obligations arise:

• Jersey and Guernsey: Both Crown Dependencies have introduced QDMTTs, ensuring that qualifying profits taxed in-jurisdiction at the 15% minimum rate do not face additional top-up taxation by the group parent's jurisdiction.
• Isle of Man: Introduced a QDMTT from January 2025, in line with the Crown Dependencies' approach.
• BVI and Cayman Islands: Both have signalled awareness of Pillar Two implications but have not introduced QDMTTs as of mid-2025. Entities in these jurisdictions that are part of in-scope MNE groups remain exposed to top-up tax in the parent's jurisdiction.
• Singapore: Has adopted Pillar Two and introduced a QDMTT, positioning itself as a compliant hub for MNE regional operations.
• UAE: Has introduced corporate tax at 9% and a QDMTT, ensuring that UAE-located entities within MNE groups benefit from the top-up tax being collected locally rather than abroad.

What CSPs Should Do Now

• Review your client portfolio to identify any entities that form part of MNE groups with €750 million+ consolidated revenues — these are the entities most likely to require Pillar Two-related support.
• Develop an internal knowledge base on Pillar Two for your team, so you can have informed conversations with clients and their tax advisers.
• Identify which of your key jurisdictions have adopted QDMTTs — this affects the advice you can give clients about the tax efficiency of structures in those jurisdictions.
• Consider whether any clients may approach you for entity wind-down or restructuring services as a result of Pillar Two economics — ensure you have the operational capability to support this efficiently.
• Update your KYC questionnaires to include a question about whether the client entity forms part of an MNE group above the Pillar Two threshold — this information is relevant to your risk assessment and your service offering.