United States – Proposed Regulations: Excise Tax on Remittance Transfers

Background

The OBBBA imposes a one percent excise tax, payable by the sender, on any U.S. outgoing remittance transfer to a recipient who is located in a non-U.S. country. The tax is collected by the remittance transfer provider (RTP) and to the extent it is not collected from the sender, it is owed by the RTP.

The excise tax does not apply to any remittance transfer for which the funds being transferred are either:

• withdrawn from an account held in or by:
  
  
  • a financial institution insured by the Federal Deposit Insurance Corporation (FDIC) or a commercial bank or trust company,
    
    
  • private banker,
    
    
  • an agency or branch of a foreign bank in the United States,
    
    
  • a credit union,
    
    
  • a broker or dealer registered with the Securities and Exchange Commission, or
    
    
  • a broker or dealer in securities or commodities,
    
    
  • provided that the financial institution holding the account is subject to the records and reports requirements applicable to U.S. regulated financial institutions;² or
    
    
• funded with a U.S. issued debit or credit card.

Proposed Regulations

Treasury and the IRS issued proposed regulations on April 10, 2026, that would clarify the application of the remittance transfer tax, including:

• specifying the amount on which the remittance transfer tax is imposed,
  
  
• determining the full scope of physical instruments that trigger the tax, and
  
  
• providing examples illustrating the application of these proposed definitions and rules.

The proposed regulations, if finalized, would establish two exclusions from the excise tax: one for small-value transactions of $15 or less,³ and one for transfers that fund the purchase of certain securities and commodities.⁴

The excise tax would apply to transfers in excess of $15⁵ for which the sender provides cash, money order, cashier’s check, or traveler’s check⁶ to the RTP, as these payment methods would not constitute a withdrawal from a U.S. financial institution. Subject to anti-avoidance rules, payments to the RTP of personal or business checks, credit or debit cards (regardless of where the card was issued), and general-use prepaid cards would not trigger the remittance transfer tax.

The amount subject to the tax would be the amount that will ultimately be transferred to the designated recipient including any promotional “bonuses” not funded by the sender.⁷ Service fees, state taxes, and other charges that are not transferred to the designated recipient would not be subject to the tax.  

The proposed regulations would provide that transactions engaged in for a principal purpose of avoiding the excise tax may be disregarded or recharacterized to reflect the substance of those transactions and therefore could be subject to the tax. The determination of whether a sender and RTP or third party have engaged in a transaction or series of transactions with a principal purpose of avoiding the tax would be based on all facts and circumstances, including facts and circumstances relevant to a remittance transfer provider’s or third party’s pattern of conduct.⁸

The proposed regulations would apply to remittance transfers made in calendar quarters beginning on or after the date the regulations are finalized, but collectors and taxpayers may rely on the proposed regulations for remittance transfers made after December 31, 2025, and before the first calendar quarter beginning on or after the date the regulations are finalized, provided they follow the proposed regulations in their entirety and in a consistent manner.

Contacts