The international tax landscape is undergoing its most profound transformation in decades. Driven by the OECD’s two-pillar reform framework, the proliferation of anti-avoidance rules, and the rapid expansion of cross-border information exchange, the rules governing how multinational groups and high-net-worth individuals structure their affairs have changed fundamentally. What was considered sound tax planning only a few years ago may today attract scrutiny, top-up taxes, or outright challenge by tax authorities across multiple jurisdictions simultaneously.

For corporate groups, company executives, and non-resident individuals with complex cross-border exposure, understanding the new environment is no longer optional, it is a prerequisite for preserving value. The following analysis sets out the key pressure points in the current international tax framework and provides practical guidance on how to adapt corporate structures and asset-holding arrangements to remain both compliant and efficient in this rapidly evolving context.

Understanding the new global minimum tax framework

Pillar Two is a series of rules designed and agreed by OECD Inclusive Framework jurisdictions with a view to ensuring an effective global minimum corporation tax rate of 15% for certain multinational groups of companies. The backbone of the rules is constituted by the OECD’s Model Rules, published in December 2021, which broadly contemplate an Income Inclusion Rule (IIR) and, as a backstop, the Undertaxed Profits Rule (UTPR). These two mechanisms work in tandem to ensure that low-taxed profits within a multinational group are subject to a top-up charge, regardless of where those profits are booked.

As of the beginning of 2025, Pillar Two rules are now in effect in over 50 jurisdictions worldwide, with further jurisdictions indicating an intention to introduce the rules in the near future. The OECD predicted in October 2024 that approximately 90% of multinationals in scope of Pillar Two rules will be subject to the 15% minimum corporate tax rate by 2025. This near-universal adoption fundamentally undermines the traditional rationale for routing profits through low-tax jurisdictions, as the tax differential that once made such arrangements attractive is now effectively neutralised by top-up mechanisms.

Under Pillar One, the allocation of taxing rights on corporate profits between countries is being transformed, while Pillar Two establishes a minimum corporate tax floor of 15% for multinational companies. Together, these reforms represent a paradigm shift: the era of unchecked tax competition between states is drawing to a close, and groups that have not yet reassessed their structures in light of these changes face mounting exposure. A thorough impact assessment, conducted with expert tax counsel, is the essential first step for any group operating across borders.

Assessing the impact on existing holding structures

Holding company structures have long been a cornerstone of international tax planning, enabling groups to consolidate ownership, manage dividend flows, and benefit from participation exemptions or reduced withholding tax rates under bilateral tax treaties. However, the combined effect of Pillar Two, strengthened anti-avoidance rules, and heightened substance requirements has fundamentally altered the risk profile of many such arrangements. Groups must now conduct a rigorous review of every layer of their holding structure to determine whether it remains defensible under current law.

Commonly affected structures include those operating in low-tax jurisdictions, using intellectual property (IP) boxes, benefiting from notional interest deductions, or enjoying tax holidays and low-taxed financing arrangements. Where the effective tax rate (ETR) at the jurisdictional level falls below 15%, a top-up charge will apply, either through a Qualified Domestic Minimum Top-up Tax (QDMTT) in the jurisdiction of the entity or through the IIR at the level of the ultimate parent. Countries where the business is located have the first right to impose a top-up tax through a qualified domestic minimum top-up tax (QDMTT).

Even groups not currently subject to top-up tax must comply with reporting requirements. Businesses near the threshold or involved in M&A activity should monitor revenue closely to determine when they might fall within scope of Pillar Two requirements. In practice, this means that holding structures which were designed around a pre-Pillar Two world must be re-examined not only for their current tax efficiency but also for their compliance burden, their substance profile, and their ability to withstand challenge under domestic general anti-avoidance rules (GAAR) and treaty abuse provisions.

Strengthening economic substance in key jurisdictions

One of the most significant practical consequences of the BEPS project and the Pillar Two framework is the heightened emphasis on economic substance. Tax authorities across the OECD and beyond are increasingly unwilling to respect arrangements where the legal form, a holding company, a finance subsidiary, or an IP-holding vehicle, does not correspond to genuine economic activity in the jurisdiction of establishment. The days of