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US Draft Bill on Remittances to Take Away 5% of Remittances of Short-Term Visa Holders

May 17, 2025

US lawmakers have introduced a draft bill proposing a 5% excise tax on all remittances sent abroad, potentially affecting African countries heavily dependent on funds sent by their diaspora.

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In the voluminous bill, which runs into 389 pages, a provision in the 327-page section calls for a ‘tax equal to 5% of the amount of such transfer’. As no exemption threshold limit has been set, it would also impact transfers of small denominations.

US lawmakers have introduced a draft bill proposing a 5% excise tax on all remittances sent abroad, potentially affecting African countries heavily dependent on funds sent by their diaspora.

The bill, unveiled by House Republicans, states that the tax would be paid by the sender and collected quarterly by the US Treasury Department. This development is the latest in a series of tough measures under President Donald Trump’s administration, which has recently ramped up its immigration and trade policies.

In the voluminous bill, which runs into 389 pages, there is a provision in the 327-page section that calls for a ‘tax equal to 5% of the amount of such transfer’. As no exemption threshold limit has been set, it would also impact transfers of small denominations.

The House of Representatives aims to pass this bill in May itself, and it will then move to the Senate. According to cross-border investment experts, this bill is likely to sail through and may become law by June-July. They are advising the diaspora to try and remit larger funds in the coming weeks to escape the remittance tax.

Africa is not the only region affected by the proposed tax of the Trump Administration. That also impacts millions of Indians and other nationalities working in the US on short-term visas, famously called H-1B visas. Once this bill is enacted, anyone who is not a US citizen and remits money outside the US will have to pay a remittance tax of 5%.

There is a significant number of people from Africa who are working in the US on short-term visas and remitting to their home countries, which is a good source of income not alone for their extended families but also for the home countries in meeting their development needs, including foreign exchange requirements. These countries include South Africa, Nigeria, Kenya, Angola, and Tanzania, whose diaspora has a considerable presence in the US.

Though the precise data for such countries in Africa is not readily available, larger economies like India and China maintain such data on an updated scale. For instance, there is a presence of millions of Indian Diaspora in the US

The US has emerged as the largest source country for remittances into India, attributed to both the size of the Indian diaspora and their income levels in America.

According to India’s Ministry of External Affairs, there are nearly 4.5 million overseas Indians in the US (which includes nearly 3.2 million ‘Persons of Indian origin’). A ‘Remittance Survey’ published by the Reserve Bank of India (RBI) in March, of the total remittances of USD 118.7 billion in fiscal 2023-24, nearly 28 per cent were from the US, with the UAE coming in as the second leading source country. A whopping USD 32 billion in remittances from the US alone.

If this bill is enacted, the Indian diaspora would end up paying USD 1.6 billion as remittance tax. This bill is the proposed tax plan released recently by the US House Ways and Means Committee. It is still not clear whether this tax is in addition to the social welfare tax being paid by the H-1B visa holders or any other short-term visa holders.