Understanding Guernsey Pillar Two rules and the Family Office structure
As the Organisation for Economic Co-operation and Development (“OECD”) Pillar Two rules come into effect in Guernsey for accounting periods starting on or after 1 January 2025, family offices with complex, multijurisdictional structures—such as those involving trusts or foundations—should evaluate their exposure and prepare for compliance. In the below article, Nana Aboagye, Client Director at Ocorian highlights that while many family offices may fall outside the scope of Pillar Two, those operating internationally must understand the rules and their possible implications.
Pillar Two and its application in Guernsey
Pillar Two is the OECD’s framework to ensure that multinational entities (MNEs) pay a minimum effective tax rate of 15% in every jurisdiction where they operate. The intent is to limit profit shifting from high-tax to low-tax jurisdictions, thereby promoting fairer taxation for MNEs globally. These rules apply only to MNEs with consolidated revenues exceeding €750 million, calculated using the highest two years within the last four fiscal years prior to the current period.
Guernsey’s Pillar Two regulations took effect from 1 January 2025, with other jurisdictions—such as the UK— already implementing similar measures. The rules do not apply to domestic-only groups or MNEs below the revenue threshold.
Notably, the regulations encompass all forms of entities, including companies, branches, trusts, foundations, partnerships, LLCs, and Protected Cell Companies (PCCs), with each PCC cell treated as a separate entity for Pillar Two purposes. Therefore, regardless of how a family office is structured, meeting the revenue threshold can trigger Pillar Two obligations.
Implications for Family Offices
Family offices managing assets through holding vehicles in multiple jurisdictions must assess whether their activities qualify for any exemptions and determine if their consolidated revenue meets the threshold. It is important to note that “consolidated revenue” may include group entities not formally consolidated in financial statements, such as those excluded by materiality or accounting standards.
If a family office headquartered in Guernsey serves as the Ultimate Parent Entity (UPE) or Intermediate Parent Entity (IPE) of an in-scope MNE, it must ensure that all entities within the group pay at least a 15% effective tax rate in their respective jurisdictions. Where a jurisdiction’s rate falls below 15%, the UPE/IPE must calculate and pay a top-up tax to the Guernsey Revenue Service.
For Guernsey family offices that are not the UPE/IPE, any entity with a local effective tax rate below 15% must also calculate and pay a top-up tax, assessed at the jurisdictional level across all Guernsey entities in the group. However, a de minimis exclusion applies if Guernsey entities’ Pillar Two revenue is below €10 million and average profit/loss over the current and two preceding years is less than €1 million.
While this exclusion means no top-up tax is due, notification to the Guernsey Revenue Service is still required.
Administrative requirements
In-scope entities must register with the Guernsey Revenue Service within 12 months of their first fiscal year starting on or after 1 January 2025, or within six months of joining the MNE group, whichever is later. Registration is expected to open by 30 November 2025.
Failure to register can result in penalties up to £20,000.
Tax returns and payments are due within 15 months after the fiscal year-end (or 18 months for the first in-scope year).
Late filing of returns can incur penalties up to £1,000 per day after 30 days of default.
Exempt entities
Government entities
International organisations
Non-profit organisations
Pension funds
Investment funds and real estate investment vehicles, if they are ultimate parent entities
Other entities associated with the above, subject to conditions
Pillar Two compliance checklist for Family Offices
Engage a professional adviser to conduct a Pillar Two impact assessment.
Review your entity structure—including foundations, trusts, PCCs, etc.—and determine if they are in scope or qualify for the de minimis exclusion.
Assess governance and tax reporting systems to ensure readiness for Pillar Two compliance.
Appoint a domestic filing entity responsible for registration and tax return filing for Guernsey entities.
Register Guernsey entities by 31 December 2025 (if your fiscal year started 1 January 2025), even if the de minimis exclusion applies.
Plan for necessary financial statement disclosures related to Pillar Two as part of 2025 financial statement preparation.
Note: The first Guernsey tax returns are due by 31 March 2027 (or 30 June 2027, for MNEs newly in scope).
How can Ocorian support with Pillar Two requirements?
The Pillar Two rules introduce significant complexity and require careful coordination across jurisdictions, along with expert advice. While many family offices in Guernsey may not be directly affected, those with international operations should proactively assess their positions. Early engagement with advisers and strategic compliance planning will be essential to managing these new requirements.
Ocorian can provide deeper insights into these regulatory changes and how they may affect your family office in Guernsey, if you need additional guidance or have any questions, please reach out to our team.