(28 May 2025 – United States) What are the implications for the money movement industry from US President Trump’s inhibitive 3.5 percent tax on remittances from non-US citizens imposed as part of the “Big Beautiful Bill”?
The tax would amount to 3.5 percent of the send amount for transfers collected by remittance service providers, banks and money transfer apps and paid every quarter to the US treasury after commencing in 2026. With no minimum transaction limit, even micro-transfers will be taxed, implying the move could pose a significant increase for non-citizens living in the US and potentially shift consumer behaviour in an unprecedented way.
Originally set at five percent, the proposed tax was reduced to 3.5 percent following a last-ditch amendment to the bill before it narrowly passed the House of Representatives vote. It comes as part of a wider scheme of measures from the US government targeting immigrants. The tax is expected to impact almost 50 million people, including unauthorised immigrants, green card holders and non-immigrant visa holders. While the close to 25 million naturalised citizens in the US are exempt, any citizens who want to send remittances abroad through a “qualified” money transfer provider would also need to provide proof of their citizenship to do so.
States in the US have introduced bills to tax remittances before but most have failed to pass after not moving past the committee stage. The remittances tax has come as a surprise to the money transfers industry, with its far reach into the customer base of many of the major remittances players, as well as the potential burdens it would create from a verification and KYC perspective. Payments companies are battling over their share of the more than US$800 billion in annual flows of transfers around the world, much of which is sent out of the US.
The ETA (Electronic Transactions Association) representing the interests of large payments companies including Visa and Western Union as well as newer financial-technology firms, along with the Financial Technology Association, Innovative Payments Association and several other lobbying groups believe the tax on remittance transfers should be killed because it invades consumer privacy and would encourage the use of unregulated money-movement services.
“This provision would create a dangerous new precedent with respect to government overreach by invading the privacy of Americans, harming American businesses, and for the first time intruding on payment transactions between private individuals. Everyday Americans would be asked to turn over sensitive identification information in order to use a regulated and licensed financial services provider to conduct ordinary, everyday financial transactions” commented Senate Finance Committee leaders Mike Crapo, a Republican from Idaho, and Ron Wyden, an Oregon Democrat.
The proposal has sparked concerns around the world, from Latin America’s poorest countries to India, that the tax could supress the value of funds that make it back to migrants’ relatives, fuelling consumption and homebuilding. Remittances make up one fifth of the economies in El Salvador and Honduras, where the transfers serve as lifelines to relatives. Transfers to El Salvador, Honduras and Guatemala have spiked to records since Trump’s election as he threatened mass deportations.
“This remittance tax provision in particular mandates a massive invasion of privacy by private businesses and the federal government on American citizens, creates undue tax burden for law-abiding Americans, reduces business revenue, complicates regulatory efforts and hinders law enforcement” the payment groups wrote in a joint statement.
“A proposed 3.5 percent US remittance tax is making waves in the money transfers industry. Part of the ‘One Big Beautiful Bill Act’, the tax would apply to outbound remittances sent by non-US citizens and be collected by licensed providers from 2026 should the tax stay in the bill and it becomes law. With no minimum threshold, this could increase costs for millions of senders but for remittance providers, it could also have significant implications for pricing, consumer behaviour and compliance. From crypto adoption to informal transfers, what might happen next and how money transfer providers may need to adapt if the bill passes the Senate?” commented FXC Intelligence CEO Daniel Webber.