Proposed USA Tax on International Money Transfers Sparks Global Concern

June 3, 2025 - Written by Frank Davies

STORY LINK Proposed USA Tax on International Money Transfers Sparks Global Concern

Triple Threat from US “Revenge Tax”, Risk of Further Dollar Selling

The House of Representatives tax bill included a proposed US section 899 legislation which would increase taxes on remittances out of the US and impose additional taxes on US investments by non-US citizens.

A tax on money transfers will have an important negative impact on many emerging economies and would risk creating strains on money transfer companies.

At an individual level, the potential for additional retaliatory taxes will deter investment in US assets, including property, with other global destinations seen as more attractive.

There is also the risk that international investment funds will take capital out of the US which would increase the risk of wider dollar selling in global markets.

The Senate debate will be watched very closely with some relief if the Upper House dilutes or blocks the provisions.

According to the legislation, a remittance tax amounting to 3.5% of transfers for non-US citizens would apply from 2026. It would be collected by remittance service providers, banks and money transfer apps with funds transferred to the Treasury. There would be no minimum transaction limit.


Smaller companies have increased competition and taken market share from established industry players such as Western Union, MoneyGram and PayPal.

These include TorFX and other money transfer companies such as Currencies Direct, OFX, Wise and FairFax.

The proposed legislation would impose new responsibilities for these remittance service companies, such as verifying the sender’s citizenship and enforcing new fee structures and introducing reporting mechanisms. These all impose new costs, burdens, and risks for the companies.

The most likely implication would be higher transfer costs, but smaller companies could be under significant pressure.

The World Bank estimated that the average cost of sending money from the US is already just over 6%.

MoneyGram CEO Anthony Soohoo commented that it was “unfortunate” that such a tax would be included in the budget. He noted that sending such payments is usually “a need” as opposed to “a want” for consumers.

There will be a big impact on global countries, especially in Asia and Latin America.


According to Capital Economics, for example, US-based remittances support 3% of the Philippines’ GDP.

Remittances from the US to Latin America totalled an estimated $160.9 billion in 2024, according to Inter-American Development Bank Migration Unit.

MoneyGram’s SooHoo added; “At this time, we are monitoring the situation and seeing how that plays out, and if it becomes something that does pass, we’ll adapt like we have with any legislation, but it’s really, right now, hard for us to know how to react.”

There will be the risk that transfers migrate to unofficial or illegal channels.

At the margin, this would tend to trigger capital outflows from the US and potentially deter inward migration, although the wider crackdown on non-US citizens would have a much larger impact.

The second element of the legislation is the retaliation against what the Administration considers unfair overseas tax practices.

According to the administration, the proposed Section 899 is intended to serve as a strong legislative response to the growing use of foreign tax regimes that, in its view, unfairly target and burden U.S. businesses and individuals operating abroad.

The provision would authorize countermeasures against persons and companies located in jurisdictions that impose what the legislation defines as an “unfair foreign tax.”

According to the Bill, non-resident individuals and foreign corporations with earnings from US such as dividends, interest, royalties and rents. —could face 5% to 20% additional tax on top of the standard applicable rate.

The US Treasury Secretary, in coordination with other agencies, will designate, maintain, and update a list of “discriminatory foreign countries”.

Greenberg Traurig considers that the Proposed Section 899 represents a major departure from traditional U.S. international tax policy.

Digital Services Taxes (DSTs) would likely be included as an unfair foreign tax which would have an UK impact.

ING commented; “There is a lot of legalese here in terms of definitions of these taxes, but one of these is the Digital Services Tax, currently employed in much of Europe and places like India and Taiwan, too.”

It added; “In theory, if these countries do not remove these discriminatory taxes in time, a new withholding tax on gross income (interest, dividends and royalties) could be applied from the start of next year should the bill go through Congress.”

This is likely to be an important area of negotiation in UK-US trade talks.

On an individual basis, a penalty rate of income tax would inevitably deter holding US assets, including property and would be likely to hit the buying of US real estate.

There could be a potential benefit for UK and European property markets

Looking at a macro scale, there is the potential for important implications.

There would be some positive impact on tax receipts, but with the risk of notable net capital outflows as investors and funds pull net funds out of the US.

There would also be a potential negative impact on consumer spending.

According to Barclays "S899 would give the U.S. free rein to tax companies and investors from countries deemed to have 'unfair foreign taxes' (and) could be seen as a tax on the U.S. capital account at a time when investor nervousness towards U.S. assets has grown."

It added; "Actively reducing foreigners' total return on their U.S. investments would dent inflows and weigh on the dollar, all else equal."

ING noted; “The Senate looks at this this week. This all adds to the narrative of the potential divestment of US assets – something we'll be tracking closely as the data emerges.”

The FT considers that the tax on foreign investors is a further reason to be wary of US assets. It’s likely to negatively affect foreign interest in US assets and would likely weigh on the USD, proving more positive for the currencies of countries most affected, such as EUR, GBP, CAD and AUD.

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TAGS: American Dollar Forecasts