OECD Pillar Two and Its Impact on Citizenship by Investment Tax Planning

Since the OECD announced the Pillar Two global minimum corporate tax framework, there has been significant confusion among HNW individuals and their advisers about its implications for citizenship by investment planning. Some commentators have suggested that Pillar Two fundamentally undermines the tax advantages offered by CBI jurisdictions. Others have dismissed it as irrelevant to individual tax planning. The reality is more nuanced, and understanding where Pillar Two does and does not apply is essential for anyone structuring their affairs around a second citizenship.

What Pillar Two Is

Pillar Two is one component of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Its core mechanism is the Global Anti-Base Erosion (GloBE) rules, which establish a global minimum effective corporate tax rate of 15% for large multinational enterprise (MNE) groups.

The framework operates through two interlocking charging mechanisms. The Income Inclusion Rule (IIR) allows a parent company's home jurisdiction to "top up" the tax on profits of subsidiary companies in low-tax jurisdictions to reach the 15% minimum. The Undertaxed Profits Rule (UTPR) serves as a backstop where the IIR cannot be applied. The Qualified Domestic Minimum Top-up Tax (QDMTT) allows jurisdictions to collect the top-up themselves rather than cede it to another country.

Over 136 countries have signed up to the framework, and the majority of EU member states, the UK, Switzerland, Japan, South Korea, and other major economies have implemented or are implementing Pillar Two domestic legislation. The rules took effect in the UK and several other jurisdictions from 1 January 2024.

The Critical Threshold: Who Pillar Two Applies To

The most important fact for the majority of CBI applicants and HNW international planning clients is that Pillar Two applies only to MNE groups with consolidated annual revenues of EUR 750 million or more.

This threshold is not arbitrary — it was specifically designed to target the largest global companies, not family offices, private investment vehicles, or the business interests of high-net-worth individuals who are below the revenue scale of multinational corporations.

For most individuals who acquire citizenship through a CBI programme and hold investments through private structures, Pillar Two has no direct application at all. Their income — whether from dividends, capital gains, rental income, interest, or business profits from entities below the revenue threshold — remains governed entirely by domestic income tax rules in the jurisdictions where they are resident or where their companies are established.

What Pillar Two Does Not Do

Given the volume of commentary on Pillar Two, it is worth being explicit about what the framework does not address:

• It does not impose a minimum personal income tax on individuals.
• It does not affect the personal income tax rules of CBI jurisdictions such as Dominica, St Kitts, Grenada, or Vanuatu, which impose no income tax on foreign-source income received by individuals.
• It does not prevent individuals from establishing genuine tax residence in a zero-tax jurisdiction and paying no personal income tax there.
• It does not cap the tax benefits available to individuals who genuinely relocate to low-tax jurisdictions.
• It does not affect the UAE's 0% personal income tax, Monaco's personal income tax exemption, or the Bahamas' tax-free status for individuals.

Indirect Effects: Where Pillar Two Does Have Relevance

While Pillar Two does not directly affect individual tax planning at the personal level, there are several indirect considerations that are relevant for internationally mobile HNW individuals with significant business interests.

Entrepreneurs with large operating businesses. An individual who owns a technology company or consumer business approaching EUR 750 million in revenue should understand that their corporate group may be within scope of Pillar Two. If they have structured operations in zero-tax jurisdictions — including CBI countries — specifically to reduce corporate tax to nil, the GloBE top-up mechanism will apply to bring their effective rate to 15%. In this context, the tax advantage of the corporate location is partially neutralised. However, the individual's personal income tax position — on dividends or capital gains from that business — remains governed by their personal residence rules.

CBI jurisdictions' competitive positioning. Several CBI jurisdictions have historically marketed themselves partly on 0% corporate tax as an attraction for entrepreneurial residents. Pillar Two reduces this competitive advantage for large businesses, though not for the typical CBI investor who operates below the revenue threshold. Most CBI country governments have not introduced corporate income tax for domestic companies below the Pillar Two threshold, meaning the majority of CBI applicants are entirely unaffected.

BEPS Substance Requirements. Separately from Pillar Two, the BEPS project's Action 5 on Harmful Tax Practices requires that companies in preferential tax regimes demonstrate genuine economic substance in the jurisdiction: real employees, actual management presence, genuine operational activity. A company established in a Caribbean CBI country with a single director and no employees was never a sustainable structure for serious business activity — BEPS substance requirements have made the standards explicit.

This substance requirement is entirely separate from Pillar Two and affects even small companies. Investors who have historically used low-substance offshore entities should review their structures in light of BEPS substance standards, independently of any Pillar Two analysis.

The EU Blacklist Consideration

The European Union maintains a list of non-cooperative jurisdictions for tax purposes, commonly called the EU blacklist. Several Caribbean CBI countries have appeared on this list at various points. EU listing carries practical consequences: enhanced withholding taxes on payments from EU entities to listed jurisdictions, restrictions on EU structural fund access, and heightened banking sector scrutiny.

Investors who maintain active business relationships with EU counterparties, or who manage EU-based assets through offshore structures, should monitor the EU blacklist status of any jurisdiction they are using. The list is reviewed periodically, and jurisdictions are added and removed based on their compliance with EU tax governance standards.

This EU blacklist pressure is a separate channel through which international regulatory scrutiny affects the practical utility of CBI jurisdictions for commercial purposes — again, independently of Pillar Two.

What Remains Valid Tax Planning

Despite Pillar Two and BEPS, the core of legitimate CBI tax planning remains intact for individuals operating below the EUR 750 million revenue threshold:

Genuine personal relocation. An individual who moves from a high-tax country, establishes genuine tax residence in a zero-tax jurisdiction, and receives their income there is engaged in legitimate tax planning that Pillar Two does not affect. The key word is "genuine" — the individual must actually reside in the new jurisdiction, spending the required number of days and meeting the local residency standards.

Personal income from non-large-MNE sources. Investment income, property income, pension income, capital gains on personal investments, and similar receipts that are not routed through a corporate group with EUR 750 million in revenue are entirely outside the scope of Pillar Two.

Use of CBI for mobility, not primarily for tax. For many CBI applicants, the primary driver is mobility — an additional passport, access to new travel corridors, or a backup citizenship — rather than tax planning. Pillar Two has no relevance to these objectives whatsoever.

Non-US jurisdictions continue to tax only residents. Outside the United States, citizenship-based taxation is essentially non-existent among major economies. Acquiring a second citizenship in a Caribbean country does not impose tax obligations based on that citizenship. Changing personal tax residence to a zero-tax country — by actually moving there — remains effective tax planning within established international norms.

A Realistic Assessment for HNW Investors

For the vast majority of HNW individuals considering citizenship by investment — including those with significant wealth and complex structures — Pillar Two is not a direct concern. Its scope is explicitly limited to very large MNE groups. Individual wealth planning, family office structures, private investment portfolios, and smaller operating businesses are all outside its direct reach.

The genuine concerns for CBI tax planning clients are different: the substance requirements arising from BEPS that predate Pillar Two; the EU blacklisting pressure on certain CBI jurisdictions; the practical banking access consequences of choosing certain offshore structures; and the need for genuine, not merely nominal, residency in low-tax jurisdictions.

Getting these considerations right requires careful, jurisdiction-specific advice from tax professionals who understand both the individual's circumstances and the current regulatory environment.

Disclaimer

International tax rules, OECD frameworks, and domestic implementing legislation are complex and change frequently. The information in this guide reflects publicly available information as of mid-2026 and is provided for general awareness only. It does not constitute tax, legal, or financial advice. Always seek specialist advice from qualified tax professionals in relevant jurisdictions before making decisions about international structure or citizenship.

How Global Investments Can Help

Global Investments advises HNW individuals on the intersection of international mobility, citizenship planning, and wealth management. We work with specialist tax counsel to ensure that clients understand the current regulatory environment — including developments such as Pillar Two and BEPS — and structure their affairs in a way that is both effective and durable. Contact our team to discuss how these frameworks interact with your specific situation.