In 2025, the U.S. introduced a new remittance tax as part of the One Big Beautiful Bill Act (OBBBA), significantly affecting Money Services Businesses (MSBs), their clients, and the global remittance landscape. This article outlines the key aspects of the tax, its impact on MSBs, and its broader economic consequences.
Overview of the Remittance Tax
The House of Representatives initially proposed a 3.5% excise tax on outbound international money transfers, with an exemption for U.S. citizens. The Senate revised this to a 1% tax, focusing primarily on cash-based or in-person transactions, while excluding electronic transfers processed through regulated entities like banks or credit card networks.
Legislative Outcome
On July 4, 2025, President Donald Trump signed the OBBBA into law (Public Law 119-21). The final legislation imposes a 1% excise tax on qualifying outbound remittances, effective for transactions after December 31, 2025.
Impacts on Money Services Businesses
The remittance tax introduces several challenges for MSBs:
- Enhanced Compliance Requirements: MSBs are responsible for collecting and remitting the 1% tax on applicable transactions, adding to their administrative workload.
- Operational Challenges: The tax’s focus on cash-based transfers requires MSBs to differentiate taxable from non-taxable transactions, increasing operational complexity.
- Customer Cost Increases: The tax burden falls on senders, potentially discouraging the use of formal MSB services.
- Shift to Informal Channels: Higher costs may drive some customers to unregulated transfer methods, reducing MSB transaction volumes.
Wider Economic and Social Effects
The tax’s implications extend beyond MSBs to affect global economies and communities:
- Reduced Remittance Flows: Nations heavily dependent on U.S. remittances, such as Mexico and Honduras, may experience decreased inflows, impacting local economies.
- Equity Concerns: The tax disproportionately affects immigrant populations, sparking debates about fairness and its impact on vulnerable communities.
Summary Table
| Topic | Details |
| Original House Proposal | 3.5% excise tax on outbound remittances, with U.S. citizen exemption |
| Senate Adjustment | 1% tax, targeting cash-based transfers; electronic transfers exempt |
| Enacted Law | Signed July 4, 2025; 1% tax effective post-December 31, 2025 |
| MSB Impacts | Increased compliance, operational complexity, and risk of customer shift |
| Broader Consequences | Reduced funds to remittance-reliant countries; fairness concerns |