US Congress Plans 3.5% Excise Tax on International Remittances

The One Big Beautiful Bill (OB3), recently passed by the House and now under Senate consideration, includes significant tax provisions with potential wide-reaching impacts. A key component, proposed Section 899, would increase withholding tax rates on U.S.-source income for non-U.S. investors from countries deemed to have unfair foreign tax regimes, potentially raising tax rates up to 20% above current levels, affecting many major economies. Another highlighted provision allows for the temporary immediate expensing of research and development costs, including software development, from 2025 through 2029, alongside the reinstatement of 100% bonus depreciation on qualifying property placed in service after January 19, 2025. Additionally, the bill proposes a controversial 3.5% excise tax on international remittances sent by non-U.S. citizens residing in the U.S., marking the first federal remittance tax and potentially impacting billions in transfers, especially to countries like India and Mexico. This remittance tax would be collected by transfer providers, with some exceptions for U.S. citizens using qualified providers, and has sparked debate given the U.S.'s position as the top source of global remittances. Overall, the bill's evolving provisions are drawing scrutiny from investors, taxpayers, and lawmakers due to their broad economic and international implications.