One Big Beautiful Bill 5% tax on remittances

[seeker]

Does anyone know the details about the 5% tax on the outgoing remittances for foreigners? I can imagine that lots of non-US citizens will wire the money out of US before this kicks in. It's not only Indians who will be impacted; it is every non-US citizen. Is there any way to get around this? Can we use Wise to convert to another currency before wiring the fund, would that be considered an outgoing remittance from US?

https://www.msn.com/en-us/money/news/trump-s-remittance-tax-plan-may-impact-indians/ar-AA1FefS4

 

[ilke]

This seems quite risky to me. Does not appear to have differentiation e.g. for non-resident aliens who are simply banking in the US with no other relevant ties (which is actually quite a lot of people). Interested to see what others have to say on this topic.

Including the direct excerpt from the bill below for clarity as well:

SEC. 112105. EXCISE TAX ON REMITTANCE TRANSFERS.

(a) In General.--Chapter 36 is amended by inserting after
subchapter B the following new subchapter:

``Subchapter C--Remittance Transfers

``Sec. 4475. Imposition of tax.

``SEC. 4475. IMPOSITION OF TAX.

``(a) In General.--There is hereby imposed on any remittance
transfer a tax equal to 5 percent of the amount of such transfer.
``(b) Payment of Tax.--
``(1) In general.--The tax imposed by this section with
respect to any remittance transfer shall be paid by the sender
with respect to such transfer.
``(2) Collection.--The remittance transfer provider with
respect to any remittance transfer shall collect the amount of
the tax imposed under subsection (a) with respect to such
transfer from the sender and remit such tax quarterly to the
Secretary at such time and in such manner as provided by the
Secretary.
``(3) Secondary liability.--Where any tax imposed by
subsection (a) is not paid at the time the transfer is made,
then to the extent that such tax is not collected, such tax
shall be paid by the remittance transfer provider.
``(c) Exception for Remittance Transfers Sent by Citizens and
Nationals of the United States Through Certain Providers.--
``(1) In general.--Subsection (a) shall not apply to any
remittance transfer with respect to which the remittance
transfer provider is a qualified remittance transfer provider
and the sender is a verified United States sender.
``(2) Qualified remittance transfer provider.--For purposes
of this subsection, the term `qualified remittance transfer
provider' means any remittance transfer provider which enters
into a written agreement with the Secretary pursuant to which
such provider agrees to verify the status of senders as
citizens or nationals of the United States in such manner, and
in accordance with such procedures, as the Secretary may
specify.
``(3) Verified united states sender.--For purposes of this
subsection, the term `verified United States sender' means any
sender who is verified by a qualified remittance transfer
provider as being a citizen or national of the United States
pursuant to an agreement described in paragraph (2).
``(d) Definitions.--For purposes of this section, the terms
`remittance transfer', `remittance transfer provider', `designated
recipient', and `sender' shall each have the respective meanings given
such terms by section 920(g) of the Electronic Fund Transfer Act (15
U.S.C. 1693o-1; relating to ``Remittance Transfers'').
``(e) Application of Anti-conduit Rules.--For purposes of section
7701(l) with respect to any multiple-party arrangements involving the
sender, a remittance transfer shall be treated as a financing
transaction.''.
(b) Refundable Income Tax Credit Allowed to Citizens and Nationals
of the United States for Excise Tax on Remittance Transfers.--Subpart C
of part IV of subchapter A of chapter 1 is amended by inserting after
section 36B the following new section:

``SEC. 36C. CREDIT FOR EXCISE TAX ON REMITTANCE TRANSFERS OF CITIZENS
AND NATIONALS OF THE UNITED STATES.

``(a) In General.--In the case of any individual, there shall be
allowed as a credit against the tax imposed by this subtitle for any
taxable year an amount equal to the aggregate amount of taxes paid by
such individual under section 4475 during such taxable year.
``(b) Social Security Number Requirement.--
``(1) In general.--No credit shall be allowed under this
section unless the taxpayer includes on the return of tax for
the taxable year--
``(A) the individual's social security number, and
``(B) if the individual is married, the social
security number of such individuals's spouse.
``(2) Social security number.--For purposes of this
subsection, the term `social security number' has the meaning
given such term in section 24(h)(7).
``(3) Married individuals.--Rules similar to the rules of
section 32(d) shall apply to this section.
``(c) Substantiation Requirements.--No credit shall be allowed
under this section unless the taxpayer demonstrates to the satisfaction
of the Secretary that the tax under section 4475 with respect to which
such credit is determined--
``(1) was paid by the taxpayer, and
``(2) is with respect to a remittance transfer with respect
to which the taxpayer provided to the remittance transfer
provider the certification and information referred to in
section 6050AA(a)(2).
``(d) Definitions.--Any term used in this section which is also
used in section 4475 shall have the meaning given such term in section
4475.
``(e) Application of Anti-conduit Rules.--For rules providing for
the application of the anti-conduit rules of section 7701(l) to
remittance transfers, see section 4475(e).''.
(c) Reporting by Remittance Transfer Providers.--
(1) In general.--Subpart B of part III of subchapter A of
chapter 61 is amended by adding at the end the following new
section:

``SEC. 6050AA. RETURNS RELATING TO REMITTANCE TRANSFERS.

``(a) In General.--Each remittance transfer provider shall make a
return at such time as the Secretary may provide setting forth--
``(1) in the case of a qualified remittance transfer
provider with respect to remittance transfers to which section
4475(a) does not apply by reason of section 4475(c), the
aggregate number and value of such transfers,
``(2) in the case of any remittance transfer not described
in paragraph (1) and with respect to which the sender certifies
to the remittance transfer provider an intent to claim the
credit under section 36C and provides the information described
in paragraph (1)--
``(A) the name, address, and social security number
of the sender,
``(B) the amount of tax paid by the sender under
section 4475(b)(1), and
``(C) the amount of tax remitted by the remittance
transfer provider under section 4475(b)(2), and
``(3) in the case of any remittance transfer not included
under paragraph (1) or (2)--
``(A) the aggregate amount of tax paid under
section 4475(b)(1) with respect to such transfers, and
``(B) the aggregate amount of tax remitted under
section 4475(b)(2) with respect to such transfers.
``(b) Statement to Be Furnished to Named Persons.--Every person
required to make a return under subsection (a) shall furnish, at such
time as the Secretary may provide, to each person whose name is
required to be set forth in such return a written statement showing--
``(1) the name and address of the information contact of
the required reporting person, and
``(2) the information described in subsection (a)(2) which
relates to such person.
``(c) Definitions.--Any term used in this section which is also
used in section 4475 shall have the meaning given such term in such
section.''.
(2) Penalties.--Section 6724(d), as amended by the
preceding provisions of this Act, is amended--
(A) in paragraph (1)(B), by striking ``or'' at the
end of clause (xxvii), by striking ``and'' at the end
of clause (xxviii) and inserting ``or'', and by adding
at the end the following new clause:
``(xxix) section 6050AA(a) (relating to
returns relating to remittance transfers),
and'', and
(B) in paragraph (2), by striking ``or'' at the end
of subparagraph (MM), by striking the period at the end
of subparagraph (NN) and inserting ``, or'', and by
inserting after subparagraph (NN) the following new
subparagraph:
``(OO) section 6050AA(b) (relating to statements
relating to remittance transfers).''.
(d) Conforming Amendments.--
(1) Section 6211(b)(4)(A) is amended by inserting ``36C,''
after ``36B,''.
(2) Section 6213(g)(2), as amended by the preceding
provisions of this Act, is amended by striking ``and'' at the
end of subparagraph (Z), by the striking the period at the end
of subparagraph (AA) and inserting ``, and'', and by inserting
after subparagraph (AA) the following new subparagraph:
``(BB) an omission of a correct social security
number under section 36C(b) to be included on a
return.''.
(3) Section 1324(b)(2) of title 31, United States Code, is
amended by inserting ``36C,'' after ``36B,''.
(4) The table of sections for subpart C of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 36B the following new item:

``Sec. 36C. Credit for excise tax on remittance transfers of citizens
and nationals of the United States.''.
(5) The table of sections for subpart B of part III of
subchapter A of chapter 61 is amended by adding at the end the
following new item:

``Sec. 6050AA. Returns relating to remittance transfers.''.
(6) The table of subchapters for chapter 36 is amended by
inserting after the item relating to subchapter B the following
new item:

``subchapter c--remittance transfers''.

(e) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply to
transfers made after December 31, 2025.
(2) Tax credit.--The amendments made by subsection (b), and
paragraphs (1) through (4) of subsection (d), shall apply to
taxable years ending after December 31, 2025.

 

[aniglo22]

Hold your accounts in a LLC :

3. Non-consumer accounts. A transfer that is requested to be sent from an account that was not established primarily for personal, family, or household purposes, such as an account that was established as a business or commercial account or an account held by a business entity such as a corporation, not-for-profit corporation, professional corporation, limited liability company, partnership, or sole proprietorship, is not requested primarily for personal, family, or household purposes. A consumer requesting a transfer from such an account therefore is not a sender under § 1005.30(g). Additionally, a transfer that is requested to be sent from an account held by a financial institution under a bona fide trust agreement pursuant to § 1005.2(b)(2) is not requested primarily for personal, family, or household purposes, and a consumer requesting a transfer from such an account is therefore not a sender under § 1005.30(g).

 

[daniels27]

Do you think they will ever implement this?

On one side, it will prevent a lot of money from being sent to the US by private individuals for personal investment, savings, etc. On the other side, the execution will be very difficult as you can literally just use debit cards for withdrawal abroad, set up a company as @aniglo22 suggests, and then what about all those HSBC Global View, Citi Global etc. where you can move money easily. They would then have to remove the US from those programs, putting them on a line with India, China and other currency controlled places.

In any case, I think it entails serious harm while avoidance is easily.

 

[Meta]

This seems quite risky to me. Does not appear to have differentiation e.g. for non-resident aliens who are simply banking in the US with no other relevant ties (which is actually quite a lot of people). Interested to see what others have to say on this topic.

Including the direct excerpt from the bill below for clarity as well:

I guess it should be interpreted as "physically in US at the moment of transfer". Not exactly clear though. Definition:
(2) the term "remittance transfer"-
(A) means the electronic (as defined in section 106(2) of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7006(2))) transfer of funds requested by a sender located in any State to a designated recipient that is initiated by a remittance transfer provider, whether or not the sender holds an account with the remittance transfer provider or whether or not the remittance transfer is also an electronic fund transfer, as defined in section 1693a of this title

 

[Martin Everson]

Western Union stock dips after proposed tax on remittances​

https://www.msn.com/en-us/money/eco...after-proposed-tax-on-remittances/ar-AA1EHr08


All this will lead to is greater use of crypto stablecoins, hawala and cash transit etc.

 

[HardRJones]

They know. This isn’t targeted at people like you or even middle class Indians or Chinese. This is targeted at poor Mexicans and Guatemalans who are definitely not going to be able to set up a LLC or use crypto. Those types will have to smuggle cash back with cousin Jose with all the associated cost and risk. They don’t even think this tax will raise money and that’s not the point. The point is to harass those types of people and cause more of them to go home.

 

[Xshore]

Was this still in the bill that passed through congress?

 

[Martin Everson]

Was this still in the bill that passed through congress?

Yes but figure has changed to 3.5%.

https://www.congress.gov/bill/119th-congress/house-bill/1/text

-----

SEC. 112104. EXCISE TAX ON REMITTANCE TRANSFERS.

(a) In General.--Chapter 36 is amended by inserting after
subchapter B the following new subchapter:

``Subchapter C--Remittance Transfers

``Sec. 4475. Imposition of tax.

``SEC. 4475. IMPOSITION OF TAX.

``(a) In General.--There is hereby imposed on any remittance
transfer a tax equal to 3.5 percent of the amount of such transfer.
``(b) Payment of Tax.--
``(1) In general.--The tax imposed by this section with
respect to any remittance transfer shall be paid by the sender
with respect to such transfer.
``(2) Collection.--The remittance transfer provider with
respect to any remittance transfer shall collect the amount of
the tax imposed under subsection (a) with respect to such
transfer from the sender and remit such tax quarterly to the
Secretary at such time and in such manner as provided by the
Secretary.
``(3) Secondary liability.--Where any tax imposed by
subsection (a) is not paid at the time the transfer is made,
then to the extent that such tax is not collected, such tax
shall be paid by the remittance transfer provider.
``(c) Exception for Remittance Transfers Sent by Citizens and
Nationals of the United States Through Certain Providers.--
``(1) In general.--Subsection (a) shall not apply to any
remittance transfer with respect to which the remittance
transfer provider is a qualified remittance transfer provider
and the sender is a verified United States sender.
``(2) Qualified remittance transfer provider.--For purposes
of this subsection, the term `qualified remittance transfer
provider' means any remittance transfer provider which enters
into a written agreement with the Secretary pursuant to which
such provider agrees to verify the status of senders as
citizens or nationals of the United States in such manner, and
in accordance with such procedures, as the Secretary may
specify.
``(3) Verified united states sender.--For purposes of this
subsection, the term `verified United States sender' means any
sender who is verified by a qualified remittance transfer
provider as being a citizen or national of the United States
pursuant to an agreement described in paragraph (2).
``(d) Definitions.--For purposes of this section, the terms
`remittance transfer', `remittance transfer provider', `designated
recipient', and `sender' shall each have the respective meanings given
such terms by section 920(g) of the Electronic Fund Transfer Act (15
U.S.C. 1693o-1; relating to ``Remittance Transfers'').
``(e) Application of Anti-conduit Rules.--For purposes of section
7701(l) with respect to any multiple-party arrangements involving the
sender, a remittance transfer shall be treated as a financing
transaction.''.
(b) Refundable Income Tax Credit Allowed to Citizens and Nationals
of the United States for Excise Tax on Remittance Transfers.--Subpart C
of part IV of subchapter A of chapter 1 is amended by inserting after
section 36B the following new section:

--------
Interesting article on it.

The Remittances Tax: High Paperwork, Low Payoff​

https://taxfoundation.org/blog/us-remittances-tax-big-beautiful-bill/

----

One example would be an international investor who maintains an account within the United States for the purpose of business. If this investor wishes to transfer funds to another account outside the country, it may bear the appearance of a remittance. But it is not one: the investor is withdrawing his or her own money, not transferring funds to others. An RTP may have difficulty verifying this, wrongfully charging someone withdrawing investment returns. In this case, the tax may function even as a de facto capital control, bearing the appearance of a capital outflow tax. This could disincentivize further and future foreign investment in the United States.

-----

Yikes...

 

[Suzy Emerald]

So, just for my understanding: if i as a non-us citizen , residing outside of the US, have a personal ibkr account in the US and want to wire money to my personal account in the EU or Switzerland for example, will this be taxed??

 

[Buttout]

if i as a non-us citizen , residing outside of the US, have a personal ibkr account in the US and want to wire money to my personal account in the EU or Switzerland for example, will this be taxed?

No. Your withdrawal doesn't count as "remittance transfer" according to the definitions in the law. In addition, you also might not even be a "sender" according to the definitions in the law.

The article Martin quoted says it might be difficult for service providers to verify where a wire is really going and so they may wrongfully charge you. Seems a bit farfetched to me, but okay.

 

[Suzy Emerald]

Ok thanks. In case of ibkr you are not allowed to transfer to 3rd parties anyway as part of ibkrs own rules. As mentioned before in this thread it may be more an integral part of the US anti-migration laws this bill.

 

[Buttout]

you are not allowed to transfer to 3rd parties anyway as part of ibkrs own rules

They actually do allow exceptions when you request them specifically from support, if you have a good reason. I have a 3rd party in my IBKR recipients list.

 

[Suzy Emerald]

They actually do allow exceptions when you request them specifically from support, if you have a good reason. I have a 3rd party in my IBKR recipients list.

Ah yes , read about that. But dont have good reasons or a need for it.

 

[Xshore]

No. Your withdrawal doesn't count as "remittance transfer" according to the definitions in the law. In addition, you also might not even be a "sender" according to the definitions in the law.

Can you point out where in the law it says that a foreign investor can transfer money without tax? The articles mention that but I couldn't see it in the law text. It does say it doesn't apply to business accounts, but a ibkr investment account is not a business account is it?

 

[Martin Everson]

So, just for my understanding: if i as a non-us citizen , residing outside of the US, have a personal ibkr account in the US and want to wire money to my personal account in the EU or Switzerland for example, will this be taxed??

Bad news...see what EY says below. Best to ask IBKR on their approach so everything is clear.

-------

Remittance transfer
"Remittance transfer" is defined by cross-reference to the Electronic Funds Transfer Act (EFTA), which applies to banks, money transmitters and others in the business of making electronic funds transfers. The purpose of the remittance transfer provisions in EFTA is to require the RTP to disclose the fees, exchange rate, net amount to be received by the recipient and certain other information.

EY observes: Because RTPs already are required to comply with EFTA, they may have business processes in place that identify remittance transfers.

A remittance transfer occurs when an RTP transfers funds from a "consumer" (defined under the EFTA as a "natural person") to a "designated recipient," whether or not the consumer holds an account with the RTP. A typical use case is individuals from a foreign country who send money to their home country through a money transmitter, although EFTA applies much more broadly, for example, when a US parent sends money to child studying abroad. A remittance transfer does not include a transfer of $15 or less.
A "designated recipient" is any person located in a foreign country and identified by the sender as the authorized recipient of a remittance transfer to be made by an RTP, and may be an entity as well as an individual. The foreign location of the recipient is a requirement, so US-to-US transfers would not result in tax.
According to a 2019 FDIC publication that explains EFTA, remittance transfers include:

1. "Transfers in cash or by another method conducted through a money transmitter or a financial institution.
2. Consumer wire transfers conducted by a financial institution upon a sender's request to wire money from the sender's account to a designated recipient.
3. An addition of funds to a prepaid card by a participant in a prepaid card program, such as a prepaid card issuer or its agent, that is directly engaged with the sender to add these funds, where the prepaid card is sent or was previously sent by a participant in the prepaid card program to a person in a foreign country, even if a sender retains the ability to withdraw such funds.
4. International ACH transactions sent by the sender's financial institution at the sender's request.
5. Online bill payments and other electronic transfers that a sender schedules in advance, including preauthorized remittance transfers, made by the sender's financial institution at the sender's request to a designated recipient."

EY observes: Without an RTP, no tax would apply, so a transfer of stablecoin or other digital assets from one wallet or address to another wallet or address by an individual would not be subject to the excise tax, provided the individual makes the transfer without the assistance of an RTP. (It is also not clear that digital assets constitute "funds" under EFTA.) The excise tax could, therefore, create an incentive to transfer funds via digital assets rather than through the banking system or fintech companies that provide alternatives to banks.

Exceptions
No tax would apply at source if the following to conditions were met:

• The RTP is a "qualified" RTP that has entered into a written agreement with Treasury to verify the status of senders as US citizens or "nationals"
• The sender is a "verified United States sender," which is defined as a US citizen or "national," as verified by the qualified RTP (A "national" owes allegiance to the US but is not a citizen; the category consists almost exclusively of persons born in American Samoa or on Swains Island.)

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