The Big Beautiful Bill: What it Means for Non-U.S. Citizens

The Big Beautiful Bill (the Bill), which is currently sitting with the Senate, includes a “Remittance Tax” provision that could have a significant impact on non-U.S. citizens currently residing and working in the U.S.

As the Bill currently stands, there will be a 3.5% Excise Tax on remittance transfers of funds held in the U.S. requested by a “Sender” from a “Qualified Transfer Provider” to a “Designated Recipient” outside the U.S.  In practical terms, any non-U.S. citizen holding funds in a U.S. financial institution who wishes to transfer those funds overseas, whether to family members or their own foreign bank account, will have a 3.5% tax withheld by the bank processing the transfer.

An important point to note is that green card holders are not U.S. citizens, and therefore, this policy will also apply to them.

This will lead to an additional compliance and administrative burden on both the banks and individual taxpayers residing in the U.S. This will also likely require a significant effort by the IRS and financial institutions to update their internal compliance procedures over the coming year, should this provision come into effect.

Currently, a U.S. financial institution requests the completion of Form W9 to confirm a person’s U.S. residency status. This helps the institution determine its own internal compliance procedures for servicing the individual as a U.S. resident and ensures there are no U.S. tax withholding requirements applicable to their U.S. tax resident status. At the moment, Form W9 simply requires individuals to confirm whether they are either a U.S. citizen or “other U.S. person,” which is broadly defined as someone who is a U.S. resident alien taxpayer in the U.S. This helps financial institutions avoid the requirement to apply backup withholding tax.

Under this new proposal, even if a person is a resident alien of the U.S. for income tax purposes, they may be subject to the remittance tax for any transfers made overseas if they are a not a U.S. citizen. As a result, we anticipate that Form W9 will need to be revised to require financial institutions to request additional information from their customers to accurately determine a person’s citizenship status as well as U.S. tax residency status. This update will help ensure compliance with the proposed remittance tax as well as the existing U.S. backup withholding tax regime.

If this proposed provision takes effect, we anticipate an update to Form W9 and subsequently:

• All financial institutions will likely issue new Form W9s to all their customers to complete, and
• Those individuals will need to complete and return those Form W9s to confirm their citizenship and income tax residency status.

An excise tax on remittance transfers of funds has appeared in various proposed bills since 2023 with the Excise Tax levy gradually decreasing over time from its initial proposal of 10% in 2023, to 5% in the first version of the Bill, to 3.5% in the current version of the Bill sitting with the Senate. It is not yet known if this will stay in place, but the impact it could have on both financial institutions’ internal compliance teams and, more importantly, those non-U.S. citizens residing in the U.S. could be significant. The Joint Committee on Taxation estimates that this part of the Bill could bring in as much as $22.2 billion through 2034.

If you wish to discuss or have any questions about the proposed Remittance Tax or any other section of the Big Beautiful Bill, please contact Kevin Brown from Anchin’s International Tax and Private Client Groups, or your Anchin Relationship Partner.